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Skip to navigationSkip to contentSkip to footerHelp using this website - Accessibility statementMenuChanticleerChanticleerLink wins big with PEXA as KKR’s bid goes popA takeover tussle has helped lift the value of electronic property conveyancing titan PEXA by 70 per cent in seven months. May 31, 2021 – 12.00amSaveShareAs the dust settles on the epic battle over electronic property conveyancing titan PEXA, the scoreboard reads well for Link Group chairman Michael Carapiet, chief executive Vivek Bhatia and their investors.Just seven months ago, when private equity duo Pacific Equity Partners and Carlyle made a revised bid for Link at $5.40 a share, it valued the rapidly growing PEXA, in which Link owns a 44 per cent stake, at $1.9 billion.Link Administration chairman Michael Carapiet has delivered a big win for investors. David RoweOn Saturday morning, Link and its fellow PEXA shareholders, including Commonwealth Bank and Morgan Stanley Infrastructure Partners, decided to float the business on the ASX at a valuation of $3.3 billion, having knocked back a last-minute bid from private equity group KKR and real estate classifieds firm Domain that valued PEXA at $3.1 billion.The float of PEXA – a snap book-build was run on Friday by Link’s advisers, UBS and Macquarie, but the corporate regulator won’t tick off until the all-important prospectus is lodged – will effectively crystallise a 70 per cent gain in the market value of PEXA in just seven months.The Link camp says that creates an extra $1 of value for investors, taking that original $5.40-a-share bid lobbed by PEP and Carlyle to about $6.40.Carapiet, the former executive chairman of Macquarie Capital, has defended Link from a series of takeover bids – some of which had the support of key shareholders – while pushing up the value of PEXA and giving shareholders exposure to its potential upside. It is expected that Link will eventually use an in-specie distribution to hand its PEXA stake over to its investors, once it has obtained a tax ruling.But the win has required some serious gymnastics.Defence tactic pays dividendLink effectively put PEXA on the block on October 23 last year in response to PEP and Carlyle’s initial bid at $5.20 a share. At that point, Link was very much in play and seemed highly likely to fall into someone else’s hands.Bringing in Macquarie and UBS to conduct an auction of the business for trade buyers and examine a potential IPO was essentially a defence tactic.With key investors including Perpetual happy to see Link in play, Carapiet granted PEP and Carlyle due diligence and then in December brought another bid to the table from US financial services tech giant SS&C Technologies; that bid valued PEXA at a back-of-the-envelope $2.2 billion.But Dion Hershan, managing director and head of Australian equities at Yarra Capital Management, says PEXA was always the key to ensuring that it wasn’t taken out on the cheap.“The number one priority was to prove up the value of PEXA,” says Hershan, a Link investor who supports the IPO decision. “I think you can say demonstrably it’s been proven up.”SS&C pulled its bid in early January and PEP and Carlyle withdrew their offer in April. But the dual track process for PEXA rolled on with the support of CBA, Morgan Stanley and Link shareholders, who justifiably wanted to see PEXA’s valued maximised.That all came to a head late last week, when a consortium led by KKR attempted to force the issue with a so-called exploding bid: $3.1 billion in cash, but only if Link did a deal by 5pm on Sunday.Views on KKR’s tactics differ. Some believe it was trying to bring the lengthy PEXA sale process to a head, while others reckon KKR wanted to wedge Link into a quick deal in the belief Link wouldn’t be able to get an IPO together in a matter of days – a reasonable proposition given PEXA hadn’t really started meeting investors and the IPO market had turned hot and cold.It didn’t work. Link and its advisers were able to line up a small group of cornerstone investors and conduced a rapid-fire book-build on Friday. Link and Commonwealth Bank will emerge with slightly larger stakes in PEXA after committing to reduce proposed capital returns by what sources said is about $500 million ($150 million for Link and $350 million for CBA).Hershan says Carapiet and the Link board have played the situation well, showing patience in the face of pressure from bidders and investors alike.He says there may be some investors who wish Link took the cash on offer through KKR’s bid, but this would have had tax consequences and many shareholders wanted to retain exposure to PEXA.He argues it’s a win for the Australian market more broadly that a company of PEXA’s quality is coming to the boards. It’s a firm he says has a dominant position in its market, is a highly scalable digital business and has proven – particularly over the past 12 months of COVID-19 shutdowns – that it is essential infrastructure.It still needs to execute on its key growth opportunities – expansion into overseas markets including Britain, New Zealand and Canada, and monetising its massive property data holdings – but Hershan says “there’s enough evidence that they’ll make progress on those fronts”.“There are very few listed companies with the market position of PEXA,” he says.The PEXA deal doesn’t solve all of Carapiet and Bhatia’s challenges, of course, and there is plenty to do to lift the performance of Link’s core superannuation administration business. But the PEXA outcome, however long in coming, is a win for board and investors alike.The country's most expert opinion and analysis.Sign up to our weekly newsletter.SIGN UP NOWJames Thomson is a Chanticleer columnist based in Melbourne. He was the Companies editor and editor of BRW Magazine. Connect with James on Twitter. 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