Australia's Link Group rejects PEP, Carlyle buyout offer

On October 12, the two private equity firms proposed a scheme of arrangement to acquire Link for A$5.20 per share, a 30.3% premium to the previous close. The stock spiked to A$5 in response to the offer and it remains close to that mark, despite the rejection. Perpetual, which owns a 9.65% stake in Link, has indicated that it would vote in favor of the buyout.

The company said in a filing that PEP and Carlyle had provided additional detail of their plans, including the spin-out of Pexa, Australia’s first and only full-service electronic network for settling property transactions, in which Link holds a 44.2% interest. However, the board felt the offer didn’t reflect the full value of Pexa or the progress of Link’s transformation plans and its market-leading position.

PEP has a long history with Link, having first invested in the business in 2005, when it bought share registry Link Market Services from Australian Securities Exchange and Perpetual Trustees Australia for A$132 million. The company acquired the second component of Link Group, fund administration services provider AAS, from Telstra Corporation in 2006, paying A$215 million.

PEP sold a minority stake in the business to Intermediate Capital Group and Macquarie for around A$200 million and then realized proceeds of A$242 million from Link’s IPO in 2015. The private equity firm completed its exit a year later, with proceeds from the public market sales alone totaling approximately A$1.15 billion. It also completed several dividend recaps.

Link manages financial ownership data for more than 6,000 clients worldwide, handling administration, data processing, reporting and analysis for pension and superannuation funds, corporates, and fund managers. The company generated A$1.23 billion in revenue for the 12 months ended June, down from A$1.4 billion the previous year. Retirement and superannuation solutions account for 33% of revenue, followed by corporate markets on 23%.

Over the same period, operating EBITDA fell from A$395 million to A$294 million and Link swung from a net profit of A$318.1 million to a net loss of A$113.9 million. Weak financial performance was blamed on regulatory changes in the superannuation industry and reduced capital markets activity because of COVID-19.

Link acquired Pexa in 2018 with Commonwealth Bank of Australia and Morgan Stanley Infrastructure Partners. The platform processes 75% of all property transactions in Australia and generated A$155.6 million in revenue and A$57.9 million in operating EBITDA for the 2020 financial year.

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• Topics
• Australasia
• Buyouts
• Financials
• Australia
• The Carlyle Group
• Pacific Equity Partners
• Financial Services
• Fund administration