Why the Link (ASX:LNK) share price is surging 12% higher today

Link’s shares are surging higher following the receipt of a takeover approach…

| More on:
A graphic image of three upward pointing arrows with smoke coming from their bottoms, indicating the arrows are taking off just like the Althea share price today

Image source: Getty Images

The Link Administration Holdings Ltd (ASX: LNK) share price is surging higher on Friday and is the best performer on the S&P/ASX 200 Index (ASX: XJO) by some distance.

In morning trade, the administration services company’s shares are up 12% to $4.87.

Why is the Link share price surging higher?

Investors have been bidding the Link share price higher today after it received a takeover approach from private equity firm, Carlyle Group.

The private equity firm, courtesy of its Carlyle Asia Partners business, has tabled a conditional, non-binding indicative proposal to acquire Link for $5.38 per share. This comprises $3.00 cash per share and a pro rata distribution of Link’s shareholding in PEXA Group Limited (ASX: PXA) valued at $2.38 per share.

Link owns a 42.77% stake in digital property settlement platform provider, PEXA.

And while today’s offer represents a premium of 24.2% to the Link share price at Thursday’s close, it is lower than previous takeover proposals.

For example, this isn’t the first time that Carlyle has made a play for Link. The private equity firm was part of a consortium aiming to acquire the company for $5.40 per share last year. It eventually withdrew its offer after SS&C Technology made a higher offer of $5.65 per share.

In addition, it is worth noting that Link has since bought back ~$101.7 million worth of its shares as part of a $150 million buyback program. That buyback has now been suspended following the Carlyle approach.

What’s next?

The Link Board advised that it intends to consider the proposal but no due diligence has been granted to Carlyle as of yet.

It also notes that the proposal remains subject to a number of conditions and has warned shareholders not to take action in relation to the proposal.

Judging by how far away from the offer price the Link share price is trading today, it appears as though the market has a few doubts that a deal will be ultimately done.

Should you invest $1,000 in Link right now?

Before you consider Link, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Link wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Link Administration Holdings Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers