Why did the Link share price surge 11% on Friday?

It’s been a tumultuous week for the Link share price.

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A businessman points to and arrow going up on a graph, indicating a share price rise for an ASX company

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Key points

  • The Link share price has finished on a high on Friday 
  • It's been a tumultuous week for the financial administration services company 
  • Investors have been spooked by details revealed about Link's takeover suitor, Dye & Durham 

The Link Administration Holdings Ltd (ASX: LNK) share price finished the session up 8.87% to $4.42 on Friday. In earlier trading, it hit an intraday high of $4.52 — 11% higher than yesterday’s closing price of $4.06. The whole market went up today with the S&P/ASX 200 Index (ASX: XJO) gaining 1.93%.

Today’s share price bump represents a strong recovery for Link Group following a tumultuous week for the soon-to-be taken over administration services company.

Subject to a shareholder vote, Link Group has accepted a takeover offer from the Canadian company Dye & Durham Ltd (TSE: DND). The offer is $5.50 per share via a scheme of arrangement. Completion is expected in June or July.

The explanatory booklet was released on Tuesday, revealing that Dye & Durham will fund the acquisition via a $3.5 billion term loan through various lenders. The problem with that is that the loan is more than three times the company’s market capitalisation.

On Wednesday, the Link share price plunged by more than 12% in the first half-hour of trading. It hit a new 52-week low of $4.19. The large fall, on a huge trading volume, prompted the ASX to pause trading.

Link responded to the ASX query saying it was “not aware of any reason for the decline in the share price and the elevated trading volumes today”. The company added: “Link Group is not aware of any material information about the proposed acquisition by Dye & Durham that is not in the Explanatory Booklet approved by the Supreme Court of New South Wales on 10 May 2022.”

As my Fool colleague James reported on Wednesday, the size of the loan “appears to have spooked investors and cast doubt on the deal closing”.

The Link share price has lost 9.8% over the past five trading days. The shares traded as low as $4.04 at one point yesterday. The Dye & Durham share price has also tanked by 19% over the same period.

What now?

Yesterday, Link released a letter to shareholders regarding the scheme booklet and scheme meeting to be held on 13 July. The Link board is unanimously recommending that shareholders approve the deal. Shareholders will also vote on a proposed capital return immediately after the takeover vote.

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

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Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in 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 Scott Phillips.

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