Dye & Durham’s Link bid not keeping pace with PEXA share price: JPM (copyright link)
Dye & Durham’s $4.57 a share revised offer for Link Administration Holdings doesn’t keep pace with the increase in PEXA’s share price, according to JPMorgan’s sell-side research.Dye & Durham CEO Matthew Proud. Supplied.PEXA’s share price had gone from $12 to $14.62 in the last couple of weeks which would increase the potential value in Link’s stake by 43 cents per Link share, JPMorgan’s Siddharth Parameswaran said in a July 6 research note sent to client.
PEXA shares had climbed even higher, to $14.83, in Friday afternoon’s trading.“If the current PEXA share price was used – we think it implies 12.5x management NPAT [net profit after tax] for non PEXA non BCM [banking and credit management] expected earnings which may be seen as being on the low side if one is expecting a takeover premium,” he wrote.“We remind also that there have been other potential suitors for parts or the whole of the LNK franchise which could crystalise more value if that level of interest was maintained.”Dye & Durham’s original offer was for $5.50 per Link share. It marked this down to $4.30 last month, before coming back with the current $4.57 that Link’s board is now considering.The bidder’s also said it would pay up to 13¢ per share per Link share from the proceeds of selling Link’s banking and credit management (BCM) division.JPMorgan reckons while Link faced headwinds in earnings risk versus the guidance for the 2022 financial year and the risk from its UK regulator review of windup of Woodford funds, it still thought they were offset by its buyback, corporate appeal and apparent cheapness of the stock.“We have a Dec-22 PT of $4.80 reflecting our SOTP [sum of the parts] valuation without any takeover premium of $4.60 (15x ex-BCM/PEXA NPAT + Link’s 43% stake in PEXA, valued at $12.54 per PEXA share) plus a small takeover premium, given the material interest from several parties, including Dye & Durham, which has received LNK Board approval, and other interest from parties, including Carlyle and FNZ,” the note said.
