Share registry and asset administration business Link Administration Holdings Ltd (ASX: LNK) has announced it is to spend around $1.5 billion acquiring UK-based financial services group Capita Asset Services.
Link will offer existing shareholders the opportunity to buy 4 new shares for every 11 already held in an attempt to raise $883 million to fund the deal, with the difference to come largely from a new £485 million bank debt facility.
The new shares will be offered at $6.75 each, which represents a 13.8% discount to the last closing price of $7.83 on June 23.
This is a significant deal for a business that will be familiar to many retail investors thanks to its place alongside Computershare Limited (ASX: CPU) as Australia’s leading provides of share registry and corporate action services.
Link only hit the ASX boards in late 2015 and it has not taken its management team long to tap investors in a big cash call to deliver on its global expansion strategy.
Link will also be able to take advantage of a weakened post-Brexit British pound (GBP) that will make the acquisition far cheaper in Australian dollar terms. The future GBP cash flows also offer the tailwind of a strengthening GBP over the medium term.
Link shares have climbed around 10% since the end of 2015 and the company has reconfirmed guidance for full year operating EBITDA of between $217 million to $219 million, with an operating profit of between $120 million to $123 million.
Motley Fool contributor Tom Richardson has no position in any stocks mentioned.
You can find Tom on Twitter @tommyr345
The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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