Noah Zivitz

Managing Editor, BNN Bloomberg

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Dye & Durham Ltd. is buying Australia-based Link Administration Holdings Ltd. for $3.2 billion in a major expansion for the Canadian cloud-based software provider that will quintuple its annual revenue base.

"This is a transformational acquisition for Dye & Durham and represents a major step forward in our 'Build to a Billion' strategy to achieve $1 billion of adjusted EBITDA," said Dye & Durham Chief Executive Matthew Proud in a release late Tuesday. 

"Link Group has achieved critical mass across multiple product categories in Australia and the United Kingdom – two of our key markets – and this acquisition both diversifies and strengthens our position in these geographies."

The acquisition will make Dye & Durham a significant player in Australia's pension administration sector, with Link boasting the world's fourth-largest pension pool, according to data from Towers Watson. 

In the deal announcement, Dye & Durham also touted Link's corporate markets division, which includes software that caters to shareholder management and engagement with other stakeholders. Two other divisions, Link’s funds solutions business and a banking and credit management unit, are being eyed for divestment by Dye & Durham, which also said it expects to achieve $125 million in cost savings after the deal closes. 

The transaction will significantly expand Dye & Durham's revenue base: Link reported A$1.2 billion ($1.1 billion) in annual revenue during its most recent fiscal year. By comparison, Dye & Durham generated $208.9 million in fiscal 2021. 

Dye & Durham said it lined up A$3.5 billion ($3.2 billion) in debt financing via Goldman Sachs, J.P. Morgan and Ares Capital Corp. to fund the deal. The company secured additional financial firepower in an equity financing backed by Ares, including $841 million in exchangeable preferred shares and up to $109 million in common shares priced at $53.00 apiece -- representing a 27 per cent premium to Dye & Durham's closing price on the Toronto Stock Exchange Tuesday. 

The deal comes a few months after a special committee of Dye & Durham's directors rejected a management-led buyout proposal and decided to stay the course after wrapping up a strategic review. 

Earlier on Tuesday, the company released results from its annual and special meetings, which demonstrated some displeasure among its shareholder base.

Notably, a plan to hand 600,000 stock options to the company's board of directors was rejected by a narrow margin of 50.9 per cent. Meanwhile, just 66 per cent of votes were cast in favour of a separate proposal to grant Proud 5,823,435 stock options. And Mario Di Pietro, a director who also chairs the board's compensation committee and previously served as BMO Capital Markets' director of technology investment banking, received lukewarm support from the investor base as 52.06 votes were cast in favour of his re-election to the board.