The Link Administration Holdings Ltd (ASX: LNK) share price has taken a tumble on Monday.
In morning trade, the administration services company's shares are down 4% to $3.32.
Why is the Link share price falling?
Investors have been selling down the Link share price this morning after the company revealed that its takeover by Dye & Durham is close to hitting the rocks.
Last week, Link advised that the UK Financial Conduct Authority (FCA) would only approve the acquisition if Dye & Durham commits funds to meet any shortfall in the amount available to cover the redress payments for the now-collapsed Woodford Equity Income Fund that Link Fund Solutions Limited (LFSL) managed.
The FCA's view was that the redress payment in relation to the Woodford matters may be for an amount up to 306 million pounds (approximately A$519 million).
What's the latest?
According to today's release, Dye & Durham has come to the view that it cannot accept the FCA conditions.
However, Link has received a revised proposal from Dye & Durham which is structured as an upfront cash payment of $3.81 per Link share plus a contingent payment.
The latter includes an additional $1.00 per share if within 24 months the FCA decides that LFSL is not liable for restitution or redress payments.
Shareholders would also receive an amount if the FCA decides LFSL is liable and the redress amount is less than 306 million pounds. In this scenario, shareholders would receive 306 million pounds less the redress amount and then divided by its total shares outstanding at the transaction completion.
Finally, shareholders would still be entitled to receive net consideration of up to $0.13 per Link share from the sale of the Banking and Credit Management (BCM) business if it is sold and proceeds are received up to 12 months after the implementation of the scheme.
Offer rejected
Given the uncertainty of this revised offer, the Link board revealed that it is unable to recommend the new proposal.
So, unless Dye & Durham comes back with a better offer, it looks likely that this takeover won't be happening.
But that won't necessarily be the end of the story. Management advised that if the scheme does not proceed, it intends to evaluate alternatives for the business. This includes an in specie distribution of a minimum of 80% of Link's shareholding in PEXA Group Ltd (ASX: PXA), in order to maximise value for shareholders.
