D&D Link bid looks as dead as a doornail

Company News

by Glenn Dyer

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Another takeover attempt for Link Administration Holdings seems headed for collapse as competition regulator, the ACCC, confirmed market reports Thursday morning that it had major qualms about the $2.9 billion offer from Canada’s Dye and Durham with a statement revealing just where those fears lay – and they seem deal ending.

It was enough to send Link shares slumping and saw increasing talk the Canadian company would walk away from the deal.

Link shrugged off the ACCC comments, saying in a statement that it said would continue to recommend the Dye & Durham offer and would work with its suitor. Link’s takeover deal with Dye & Durham is in the final stages.

It’s the fourth takeover offer that Link has received in recent years. Other suitors, notably Private Equity Partners have been scared off by the threat of a class action in the UK.

The offer value is $2.9 billion or around $5.38 per Link share but, after Thursday’s 10%+ fall to $3.35, Link’s market value is now more than $1.1 billion less than that.

That’s investors saying the deal is dead.

In its statement on Thursday, the ACCC said that “While combining D&D and Link does not raise issues, by acquiring Link, D&D would gain the 42.77% shareholding in PEXA Group Ltd (PEXA) that Link currently owns. It is the potential vertical integration of D&D’s operations and PEXA that gives rise to the competition concerns.

These concerns relate to the conveyancing sector which is in a transitional period as it moves to electronic conveyancing and digitalisation,” the ACCC said.

“D&D provides information broking services, conveyancing and legal practice management software and manual property settlement services in Australia. PEXA operates an Electronic Lodgment Network which facilitates digital conveyancing settlements.

“Consumers may not be familiar with these companies in name, however this acquisition is relevant to anyone buying or selling property,” ACCC Deputy Chair Mick Keogh said in the statement.

“Conveyancing is a critical element of property markets in Australia that affects financial settlement and title transfer. E-conveyancing has digitised and transformed this process in recent years and services throughout the conveyancing workflow are becoming increasingly integrated, including directly into the PEXA Exchange.

“The proposed acquisition would align PEXA, a near monopoly provider of Electronic Lodgment Network services, with D&D, a significant supplier of software to lawyers and conveyancers, significantly increasing vertical integration in this industry.

“Given PEXA’s position as the only fully operational Electronic Lodgment Network, the ACCC will closely scrutinise any transaction that would result in vertical integration between PEXA and other industry participants,” Mr Keogh said.

While the transaction will not provide D&D with majority control of PEXA, the ACCC considers preferential conduct may benefit both D&D and PEXA.

“We have significant preliminary concerns that this transaction would enable D&D and PEXA to engage in mutual preferential dealing that would hinder existing competition or raise barriers to entry in one or more markets in the conveyancing workflow,” Mr Keogh said.

The ACCC is also considering how the regulatory framework for Electronic Lodgment Network Operators affects these concerns, including recent amendments relating to the important issue of interoperability between Electronic Lodgment Network Operators. The regulatory framework is evolving over time, but market participants have expressed concerns about whether it will effectively constrain D&D and PEXA’s ability to engage in conduct that hinders competition.

The ACCC invites submissions from interested parties in response to the statement of issues by 7 July 2022.

The ACCC’s final decision is scheduled for September 8 this year.

…………

Meanwhile the UK class action against Link that had been mentioned in numerous reports, became reality this week.

On Monday, Link confirmed the action had been filed in a UK court on behalf of investors in a Link-administered fund, the LF Equity Income Fund (previously the Woodford Equity Income Fund).

It was been hit with scandal after it suspended in 2019 and investor funds were frozen from withdrawals after being unable to meet redemption requests. The Financial Times has described the fallout as “the biggest British investment scandal in a decade”.

Link says it will vigorously defend the claim brought against it by investors in a scandal-plague fund that has chalked up £1 billion ($A1.75 billion) in investment losses.

Link said on investors on Thursday that it expected to soon be served with the action that relates to the freezing of a £3.7 billion investment fund that has around 300,000 investors.

The fund is estimated to have lost more than £1 billion in value since being frozen.

Two law firms in the UK, Harcus Parker and Leigh Day, have joined forces to lodge the claim against Link.

The action alleges the fund breached its requirements to have enough liquid assets to be able to meet requests from investors to withdraw funds. Instead, the fund invested in investments that were illiquid, or could not be readily sold to meet investor redemption requests.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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