Link board ‘unable to recommend’ revised takeover bid

Last week, legal technology company Dye & Durham increased its takeover bid for Link Administration Holdings Limited (Link Group) to $4.57 per share, after its reduced offer of $4.30 per share was rejected earlier this month.

The board of Link Group has now declared that it is unable to recommend Dye & Durham’s (D&D) revised takeover bid.

In an ASX announcement on Monday (11 July), Link Group said it had carefully considered D&D’s new offer and had reached its latest conclusion after considering multiple factors including stakeholder feedback, the underlying value of its shares, changes in market valuations and the alternatives available to the company if a transaction does not proceed.

“Link Group is continuing to engage with Dye & Durham in relation to whether an agree position can be reached on the matters raised in Dye & Durham’s letters, noting any agreed reduction to the scheme consideration proposed will be subject to Dye & Durham having proposed, and working with the ACCC on an ongoing basis to ensure it puts into effect, undertakings which satisfy the ACCC’s concerns,” the firm said.

D&D has not yet responded to the latest decision from Link.

Background to the deal

The Canadian legal tech and e-conveyancing firm had previously been in talks to acquire Link for $5.50 per share in December 2021.

It had hoped that the takeover would have concluded by July 2022, pending regulatory approvals.

However, the Australian Competition and Consumer Commission (ACCC) declared concerns around the deal, worrying about the impacts for competition in the conveyancing sector, as it transitions to digitisation.

These concerns arose as Link currently holds a 42.7 per cent stake in PEXA Group, which operates an electronic lodgement network that facilitates digital conveyancing settlements and currently dominates the Australian e-conveyancing market.

The ACCC said the sale would align PEXA, a “near monopoly provider of electronic lodgement network services” with Dye & Durham, a significant supplier of software to lawyers and conveyancers, and significantly increase vertical integration in the industry.

While the transaction would not grant Dye & Durham majority control of PEXA, the regulator believes both companies would benefit from preferential conduct.

ACCC deputy chair Mick Keogh commented at the time that the regulator had closely scrutinised the transaction and the potential for vertical integration due to PEXA’s position as the “only fully operational electronic lodgement network”.

“We have significant preliminary concerns that this transaction would enable D&D and PEXA to engage in mutual preferential dealing that would hinder existing competition or raise barriers to entry in one or more markets in the conveyancing workflow,” Mr Keogh said.

The matter has been referred to a more comprehensive review, with the ACCC set to return a final decision on 8 September.

D&D earlier suggested that it was considering providing an undertaking to the ACCC in order to obtain its approval after the competition regulator raised its concerns.

[Related: Dye & Durham ups bid for Link]