Why is the Link share price crashing 20%?

Link shares are being hammered on Tuesday…

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Key points
  • Link's shares have been smashed on Tuesday
  • Concerns that its takeover could crumble are weighing on its shares
  • This follows news out of the UK relating to the Woodford collapse

The Link Administration Holdings Ltd (ASX: LNK) share price is having a day to forget on Tuesday.

In morning trade, the administration services company's shares have returned from their trading halt and are down a massive 20% to $3.55.

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.

Image source: Getty Images

Why is the Link share price crashing?

The weakness in the Link share price on Tuesday has been driven by the release of an update on the proposed takeover of the company.

As you might have guessed from the share price reaction, things are not looking good for the transaction.

This is due to Link's Link Fund Solutions Limited (LFSL) business and its dealings with the UK Financial Conduct Authority (FCA) regarding LFSL's role as authorised corporate director to the LF Woodford Equity Income Fund. LFSL managed the now-collapsed Woodford Equity Income Fund.

According to the release, the FCA has approved Dye & Durham's proposed acquisition of LFSL. However, this is subject to a requirement that Dye & Durham commits to make funds available to meet any shortfall within LFSL in the amount available to cover the redress payments LFSL may be required to make.

The FCA's current view is that the redress payment in relation to the Woodford matters may be for an amount up to 306 million pounds (approximately A$519 million).

If Dye & Durham does not accept the requirement, then a condition under the scheme implementation deed may not be satisfied and the transaction could collapse.

As things stand, Dye & Durham has not yet indicated its position in relation to the FCA's requirement and Link will update the market as appropriate.

It is also worth noting that the FCA has revealed that this is not a final decision. Furthermore, LFSL does not agree with the FCA's view and intends to explore all options, including challenging any warning notice that may be issued.

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. 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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