The Link Administration Holdings Ltd (ASX: LNK) share price has come off the ice this afternoon as the company confirms it has entered into a Scheme Implementation Deed with Dye & Durham.
Link Group shares have sprung out of the freezer to now trade 15% higher on the day at $5.52, the highest price in almost 12 months.
Under the terms of the agreement, Dye & Durham will acquire 100% of the share capital in Link Group by way of a Scheme of Arrangement. Here are the details.
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What did Link announce?
Aside from confirming the acquisition, Link advised that its group shareholders will receive $5.50 per share in cash under the scheme, plus a 3 cents per share interim dividend. This is expected to be franked at 100%.
Link Group intends to pay another fully franked special dividend of approximately 8 cents per share and this special dividend will be deducted from the $5.50 base consideration.
The total fully franked dividends (including both the interim dividend and special dividend) is expected to be approximately 11 cents per share thereby enabling eligible Link Group shareholders to receive approximately 4.7 cents per share in additional benefit from franking credits.
In addition, Link Group says that if it reaches an agreement to sell the Banking and Credit Management business, shareholders are entitled to receive any net consideration received from the sale prior to, or up to 12 months after, the implementation of the scheme.
For indicative purposes, this would represent approximately an additional 15 cents per share of value to Link Group shareholders under the case scenario assumptions.
With respect to the base consideration of $5.50 per share plus the interim dividend of 3 cents per share, this values Link Group's equity at $2.9 billion and implies an enterprise value of $3.7 billion on the company.
It also represents a significant premium of 27.7% to the closing price on 4 November 2021, the day prior to Link Group announcing that it had received a proposal from Carlyle.
The proposed deal also implies transaction multiples of 9.4x EV/EBITDA, 17.1x EV/EBIT and 25.4x P/NPAT, each on FY21 figures.
Link Group's Board unanimously recommends that Link Group shareholders vote in favour of the scheme in the absence of a superior proposal. An expert opinion will also be sought to examine if the deal is in the best interest of shareholders.
The scheme is still subject to certain conditions which must be satisfied before it can be implemented.
With respect to the offer from Carlyle, the company also advised today that "after approximately 5 weeks of detailed due diligence, no binding offer has been received from Carlyle".
Management commentary
Speaking on the announcement, Link Group Chairman Michael Carapiet said:
After receiving a conditional, non-binding proposal from Carlyle on 4 November 2021, the Board said that it would continue to assess all alternatives that have the potential to optimise the interests of Link Group and its shareholders. This included providing a period of non-exclusive due diligence to Carlyle to determine whether a revised proposal could be developed and recommended to shareholders. The Board also announced that it would assess a number of other standalone value creation initiatives including the sale of non-core assets and the potential demerger of Link Group's shareholding in PEXA via an in-specie distribution to shareholders.
Link Group Chief Executive Officer and Managing Director, Vivek Bhatia said:
The proposed transaction is an endorsement of Link Group's leading global technology enabled platform. The combination with Dye & Durham will support our growth strategy and create significant opportunities for our employees and our customers. I am excited to partner with Dye & Durham for this next stage of Link Group's journey.
The Link share price has struggled this past 12 months, having fallen more than 1% in the red in that time, after sliding another 1% this year to date.
