Canadian software firm Dye & Durham Ltd. may be able to walk away from a billion-dollar takeover of Link Administration Holdings Ltd. after the Australian data-services company was hit with the prospect of a hefty fine by the U.K. financial regulator following an investigation into the collapse of a fund managed by U.K. businessman Neil Woodford.
The Financial Conduct Authority (FCA) issued a draft warning notice to Link on Tuesday proposing a £50-million penalty ($75.8 million) in addition to as much as £306.1 million ($464.1 million) in redress it may have to pay after a lengthy probe tied to the 2019 collapse of the LF Woodford Equity Income Fund (WEIF), which was managed by the company’s U.K. subsidiary, Link Fund Solutions Ltd. The regulator said Link has 14 days to respond to the draft warning, or it could settle the case and potentially pay a lesser fine.
In a statement Tuesday, Link said it would “explore all options, including engaging in settlement discussions with the FCA” but the parent company has not yet made any firm commitment to fund or financially support its U.K. subsidiary.
However, Dye & Durham – which first announced plans to acquire Link in December for $3.2 billion – said the potential fine has triggered a clause in its takeover agreement that could allow the Toronto-based company to walk away from the deal if Link’s U.K. subsidiary is unable to pay any penalties tied to the Woodford Fund collapse.
“Dye & Durham continues to attempt to engage with Link Group in respect of the proposed acquisition, and will provide updates on the matter when it is legally required or otherwise appropriate to do so,” the company added in a statement.
Since its initial announcement in December, Dye & Durham has revised the terms of its takeover offer for Link, most recently offering A$3.81 ($3.39) per share for the company, with an additional A$1 ($0.89) per share payout within two years if it turns out that no redress payments are due.
Link shortly rejected the new takeover terms, stating that its board couldn't recommend the new proposal to the company’s shareholders. In addition to exploring alternatives for its business, Link has proposed divesting most of its 43 per cent stake in electronic conveyancer Pexa.
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