Link share price jumps 26% on $1.2b takeover offer

Link shares could soon be leaving the ASX boards.

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The Link Administration Holdings Ltd (ASX: LNK) share price has burst out of the gates on Monday morning.

At the time of writing, the administration services company's shares are up 26% to $2.14.

Two CEOs shaking hands on a deal.

Image source: Getty Images

Why is the Link share price jumping?

Investors have been buying the company's shares today after it received and accepted a takeover offer.

According to the release, Link has entered into a scheme implementation deed with Mitsubishi UFJ Trust & Banking Corporation, under which the latter will acquire 100% of the shares in Link Group by way of a scheme of arrangement.

Mitsubishi UFJ has tabled a $2.26 cash per share offer, which comprises $2.10 cash per share and a 25% franked dividend of $0.16 per share.

This represents a 32.9% premium to where the Link Group share price ended last week. It values its equity at $1.2 billion and implies an enterprise value of $2.1 billion.

Why was the offer accepted?

Link Group's Chair, Michael Carapiet, highlights the offer's significant premium. He said:

We are pleased that The Trust Bank has recognised value in Link Group's market leading and global businesses of Retirement & Superannuation Solutions (RSS) and Corporate Markets (CM).

While the Link Group Board has and remains confident about the company's future, we acknowledge that the Scheme provides shareholders with the opportunity to receive cash value at a significant premium.

The Board's unanimous recommendation [to vote in favour of the scheme] was based on a thorough evaluation of various factors, including Link Group's intrinsic value under different scenarios and the potential medium-term share price without the Scheme.

The Board believes that the proposed transaction will benefit both shareholders and stakeholders, and is in line with the Board's priority to deliver shareholder value.

The Link's board's unanimous recommendation is in the absence of a superior proposal and subject to an independent expert concluding that the scheme is in the best interests of shareholders. The scheme remains subject to various approvals.

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. 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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