18/09/2022

Dye & Durham makes revised proposal to Link Group in light of potential £306 million (A$523 million) regulatory liability

  • Maintains up to A$4.81 per share consideration
  • Offers greater value more quickly and with certainty of execution compared to other options available to Link Group shareholders

TORONTOSept. 18, 2022 /CNW/ – Dye & Durham Limited (TSX: DND) (“Dye & Durham” or the “Company”), a leading provider of cloud-based, efficient workflow software for legal and business professionals, announced today that it has made a revised proposal to Link Administration Holdings Limited (ASX: LNK) (“Link Group”) with respect to Dye & Durham’s proposed acquisition of Link Group.

The revised proposal maintains consideration of up to A$4.81 per Link Group share, on which the Company and Link Group agreed in July. Of the total, Dye & Durham has proposed to pay A$3.81 per share upon the successful implementation of the acquisition’s scheme (the “closing”). Up to A$1.00 per share, being the remaining portion of the purchase price, would be payable upon a final and binding conclusion of the UK Financial Conduct Authority’s (“FCA”) active enforcement investigation into Link Fund Solutions Ltd. (“LFS”) within 24 months of the closing.

“Our revised proposal ensures Link Group shareholders receive the same economic value as our earlier offer, while taking into account the impact of the potential Woodford Fund liability,” said Matthew Proud, CEO 0f Dye & Durham. “In fact, our proposal caps the amount of that liability for Link Group shareholders and helps Link Group avoid what could be years of costly litigation with an unknown outcome and significant and ongoing reputational damage. Based on our due diligence, we firmly believe that consummating this transaction under the existing scheme implementation deed will create more value with greater speed and certainty of execution than any alternative.”

The FCA’s enforcement investigation relates to LFS’s management of the collapsed LF Woodford Equity and Income Fund (“Woodford Fund”). Earlier this month, the FCA notified Dye & Durham it will not approve its proposed acquisition of Link Group unless Dye & Durham undertakes to cover any shortfall in the value of the assets of LFS, up to a maximum of £306 million in relation to any restitution and/or redress payments that the FCA may levy on LFS in the Woodford Fund case. FCA approval is a condition precedent to the proposed acquisition’s scheme implementation deed.

Under Dye & Durham’s revised proposal, if LFS is not found liable by the FCA for restitution or redress payments related to the Woodford Fund – which the Company understands Link Group management believes to be possible – then Link Group shareholders would receive the full remaining A$1.00 per share from Dye & Durham. If the FCA rules that LFS is in fact liable for redress, and that amount is less than £306 million, Dye & Durham would make a cash payment per Link Group share based on the difference between £306 million and the actual redress amount.

Dye & Durham believes its new proposal is the best outcome for Link Group for a number of key reasons:

  • It delivers a premium to the current share price and certainty of an outcome. Link has been “in play” for an extended timeframe, with multiple parties conducting due diligence and assessing the potential value of the company, with no other alternatives having surfaced which delivers the value and certainty of closing versus Dye & Durham’s proposal.

  • The prior proposal at A$4.81 per share was recommended by Link Group’s Board of Directors and overwhelmingly voted in favour by Link’s shareholders – Dye & Durham’s new proposal maintains the possibility of providing A$4.81 to Link’s shareholders and, appropriately, adjusts dollar for dollar to the extent restitution and/or redress payments are levied on LFS. If Link Group is in fact found liable by the FCA for restitution or redress payments related to the Woodford Fund, Link Group shareholders are no worse off, as the liability is an existing one that impacts every Link Group shareholder.

  • The fair value for Link, published in the Supplementary Explanatory Booklet and calculated by the independent expert, resulted in a range of A$4.34 – A$5.51, before adjusting for any potential redress payment – where £306 million equates to an approximate A$1.00 per share loss. Dye & Durham’s new proposal delivers A$3.81 on closing, up to A$1.00 depending on a final and binding conclusion from the FCA and up to an additional A$0.13 from the proceeds from any sale of Link Group’s Banking and Credit Management Business.

  • Dye & Durham believes Link Group will achieve more value for its shareholders by accepting its revised proposal versus a “status quo” or other breakup strategies, which carry significant execution risk over a long period of time and where asset values are offset by tax leakage, stranded shared services costs, outstanding debt and likely restrictions imposed by the FCA. A potential “break-up” scenario value, if one can be executed, is illustrated in the following table:

In A$ Millions

A$ Per Share

Source

Low

High

Low

High

RSS

Experts Report Valuation

$1,215

$1,450

$2.33

$2.78

CM – Regulated by FCA

Experts Report Valuation

$765

$900

$1.47

$1.73

FS – Regulated by FCA

Experts Report Valuation

$285

$368

$0.55

$0.71

BCM – Regulated by FCA

Experts Report Valuation

$65

$75

$0.12

$0.14

Corporate

Experts Report Valuation

($227)

($201)

($0.44)

($0.39)

Core Business EV

$2,103

$2,592

$4.03

$4.97

Interest in Pexa

Current Market Value

$1,073

$1,073

$2.06

$2.06

Other Assets / (Liabilities)

Experts Report 

$111

$111

$0.21

$0.21

Net Cash / (Debt)

Experts Report 

($1,134)

($1,125)

($2.17)

($2.16)

Less: FCA Redress (£306MM)

FCA Notice

($523)

($523)

($1.00)

($1.00)

Equity Value

$1,630

$2,128

$3.13

$4.08

Less: Minority Interests

Experts Report 

($1)

($1)

($0.00)

($0.00)

Equity Value – Link Interest Standalone

$1,629

$2,127

$3.12

$4.08

Less: Breakup Tax Leakage

Footnote 1

($338)

($447)

($0.65)

($0.86)

Equity Value – Link Interest Breakup

$1,291

$1,680

$2.48

$3.22

Dye & Durham Proposal

Upfront Consideration

$1,987

$1,987

$3.81

$3.81

Plus: BCM Deferred Consideration

$68

$68

$0.13

$0.13

Total (Pre-FCA Contingent Consideration)

$2,055

$2,055

$3.94

$3.94

Premium to Breakup Value

59 %

22 %

59 %

22 %

Note: Experts Report Valuation based on the Independent Expert Report as published by Link in the Supplementary Explanatory Booklet

1. Assumes 30% tax paid on the RSS and CM high and low asset valuations less their estimated cost base.

  • The FCA regulates not only LFS but also Link Group’s Corporate Markets and Banking and Credit Management businesses. Given this, Dye & Durham believes that Link Group would have difficulty distributing any sale proceeds from any of its businesses to Link Group shareholders until after the Woodford liability is addressed.

Dye & Durham has advised Link Group it is ready to implement this proposal on an expedited basis within the current scheme implementation deed, as amended, subject only to Court, Link Group and Link Group shareholder approval. The Company anticipates that completion could occur by the end of calendar 2022.

The revised proposal is subject to the negotiation of satisfactory documentation between the Company and Link Group and subject to agreement from Dye & Durham’s financiers.

About Dye & Durham

Dye & Durham Limited is a leading provider of cloud–based software and technology solutions designed to improve efficiency and increase productivity for legal and business professionals. Dye & Durham provides critical information services and workflows, which clients use to manage their process, information and regulatory requirements. The Company has operations in Canada, the United KingdomIreland and Australia, and has a strong blue-chip customer base that includes law firms, financial service institutions, and government organizations.

Additional information can be found at www.dyedurham.com

Forward-looking Statements

This press release may contain forward-looking information within the meaning of applicable securities laws, which reflects the Company’s current expectations regarding future events, including statements relating to the Company’s planned acquisition of Link Group, the amendment of terms thereof, the approvals of such amended terms and the closing of the planned acquisition. In some cases, but not necessarily in all cases, forward-looking statements can be identified by the use of forward looking terminology such as “plans”, “targets”, “expects” or “does not expect”, “is expected”, “an opportunity exists”, “is positioned”, “estimates”, “intends”, “assumes”, “anticipates” or “does not anticipate” or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, “will” or “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking statements. Forward-looking statements are not historical facts, nor guarantees or assurances of future performance but instead represent management’s current beliefs, expectations, estimates and projections regarding future events and operating performance.

Such forward-looking information is necessarily based on a number of opinions, estimates and assumptions. Forward-looking information is also subject to a number of risks and uncertainties, many of which are beyond the Company’s control, which could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such risks and uncertainties include, but are not limited to, the risk associated with the Company’s and Link Group’s ability to obtain the approvals that are required to amend the terms of the proposed acquisition and consummate itand the timing of the closing of the proposed transaction, including the risk that amended terms are not approved, the conditions to the transaction are not satisfied on a timely basis or at all and the failure of the transaction to close for any other reason; the risk that a consent or authorization that may be required for the proposed amendment and the transaction itself is not obtained or is obtained subject to conditions that are not anticipated; the outcome of any legal proceedings that may be instituted against the parties and others related to the acquisition agreement; unanticipated difficulties or expenditures relating to the transaction, the response of business partners and retention as a result of the announcement and pendency of the proposed amendment or the transaction itself; the Company being unable to realize expected synergies; and the diversion of management time on transaction-related issues, as well as the factors discussed under “Risk Factors” in the Company’s most recent annual information form. If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. Accordingly, investors should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this news release represents the Company’s expectations as of the date of this news release, and are subject to change after such date. The Company disclaims any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as expressly required under applicable law.

SOURCE Dye & Durham Limited

For further information: Dye & Durham Investor Relations, Ross Marshall, Phone: (416) 526-1563, Email: [email protected]

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