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Link investors split on merits of $2.8b takeover bid

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Perpetual, which owns 9.65 per cent of Link’s shares, has given the green light to the deal if it is approved within six months.

However, Link’s second largest shareholder, Yarra Capital, said the company should wait for a better offer as it was currently undervalued due to headwinds that were now “in the rear window”.

“Opportunities often arise when good companies hit a rough patch,” Yarra Capital managing director Dion Hershan said. “The offer price which has been tabled, we don’t think is absolutely compelling.”

PEP and Carlyle’s offer valued Link’s equity at $2.76 billion, and Mr Hershan said this had “materially undervalued” the company’s “great assets”.

“It’s obvious to everyone that Link was trading at $6 per share in February and the business is not materially different,” Mr Hershan said. “Listed markets can be very impatient, the long-term value that PEXA can and will create is not obvious to everyone at the moment.”

PEXA is a property settlements platform in which Link has a 44.2 per cent stake. The business contributed $23.6 million to Link’s operating profits, up from $2 million the previous year. Mr Hershan said there was a “sense of inevitability” that that business would be spun off, claiming it vastly outperforms its competitors.

“If it was a standalone company, it would compare favourably to the WAAAX stocks [WiseTech, Appen, Altium, Afterpay and Xero], it’s got higher growth and profitability,” Mr Hershan said. “There are structural and cyclical issues that will pass. A strong business exists and the foundations for recovery exist.”

The consortium is open to leaving PEXA out of the takeover bid as value is seen in the other, core business parts of the company. “If the shareholders would prefer to retain that exposure and sell the remainder, that’s something we’re willing to explore,” said a source close to the negotiations, who was not authorised to speak with the media.

PEP floated Link in October 2015 for $6.37 per share. Mr Hershan said it was not uncommon for private equity firms to revisit assets “they know extremely well”.

Tribeca Investments senior portfolio manager Jun Bei Liu said the bid was “opportunistic” but would put pressure on the board to lift its game.

“Clearly Link has reported poor earnings in its core business for quite some time now and clearly COVID and the like has impacted the business,” Ms Liu said. “There are a lot of frustrated shareholders sitting on the register, they want the board to do something about it rather than dismiss it.”

Link hired additional staff to process about half of the $34.1 billion payments made under the government’s emergency access to super scheme and has also been responsible for overseeing the Protecting Your Super reforms, introduced in July last year as a government-led effort to stamp out inactive and duplicate accounts.

Link has appointed Macquarie Capital and UBS as financial advisers and law firm Herbert Smith Freehills to oversee the negotiations as the private equity consortium runs the ruler over Link.

“It should be noted that there is no certainty that the discussions with the consortium will result in any transaction,” Link told the ASX on Monday morning.

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