ASX-listed investment administration firm, Link Group, has abandoned a proposed sale to Canadian technology firm, Dye & Durham, after failing to gain court approval for the scheme-of-arrangement takeover amid a UK regulatory mess.
Link inked a conditional agreement with Dye & Durham last December in a deal that valued the Australia-headquartered admin business at NZ$3.6 billion.
But the jinxed acquisition has since met with several obstacles including significant financial penalites imposed on Link for its role in the collapse of the UK Woodford Equity Income Fund in 2019.
Earlier in September the UK Financial Conduct Authority (FCA) stung the administrator with an order to set aside £306 million to cover potential remediation for Woodford investors and later flagged a further £50 million fine in relation to the fund failure.
The UK Link Fund Solutions (LFSL) business was ‘authorised corporate director’ of the £3.7 billion Woodford fund, providing services akin to those of licensed supervisors in NZ (or responsible entity in Australian parlance) in addition to administration, which brings hefty regulatory obligations.
Link told the ASX mid-September that the company “has not made any commitment to fund or financially support LFSL”.
“Link Group considers that any liabilities relating to the Woodford Matters will be confined to LFSL,” the release says.
Woodford froze the once popular fund in 2019 after certain illiquid underlying assets soured, highlighting breaches of its investment strategy.
A Link statement posted to the ASX on Friday says the group failed to meet several sale conditions with the ‘Woodford matters’ top of the list.
“There is no expectation that the Outstanding Conditions Precedent for the Transaction will be satisfied,” the Link release says. “Accordingly, at the Second Court Hearing today, the Court declined to make orders approving the Scheme and dismissed proceedings.”
Link, headed by Vivek Bhatia, had dallied with a few potential buyers prior to the Dye & Durham deal, which came at the same time as the global Apex Group purchased NZ investment admin firm, MMC.
Dye & Durham chief, Matthew Proud, said in a statement: “While we are disappointed with this outcome given the significant time and resources invested in managing this process over the last ten months, we have a robust pipeline of M&A opportunities before us and a proven and extensive track record of allocating capital to acquisitions that deliver outsized investor returns.”
Link provides services in NZ such as share registry and fund administration (including several KiwiSaver schemes).
On Friday the Link share price closed at A$3.31, down from a high of almost A$4.60 earlier in September.