Noah Zivitz

Managing Editor, BNN Bloomberg

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Dye & Durham Ltd. is slashing its takeover offer for Link Administration Holdings Ltd. as it navigates regulatory objections to the deal that was announced more than half a year ago.
 
In an update filed with the Australia Stock Exchange Sunday, Link said Dye & Durham has proposed cutting its buyout offer 22 per cent to A$4.30 per share from A$5.50. Link attributed the revised price to "the current state of the financial markets," as well as an unspecified undertaking that Dye & Durham is planning to make to the Australian Competition & Consumer Commission (ACCC), which has repeatedly stated its concerns about the transaction.

“Other than a reduction in the offer price, Dye & Durham is not prepared to make any further amendments or alterations to the [transaction] and that the company expects the ACCC approval, based on the contemplated undertaking, will satisfy one of the key outstanding conditions of the [transaction],” Dye & Durham said in a statement Monday. 

Link said it will consider the amendments proposed by Dye & Durham and plans to update its shareholders in the next week. One analyst cautioned that the deal may be at risk.
 
“There are several scenarios that may occur, including the board rejecting the new offer. We assume if that occurred [Dye & Durham] may pull its offer and pay the break fee,” wrote Stephen Boland, an analyst at Raymond James, in a note to clients Monday.
 
Boland added that other suitors may now present rival offers to Link. However, if Link’s board approves the revised offer, Boland said that would be positive for Dye & Durham’s leverage ratio. 
 
The acquisition of Link was announced last December; it was billed by Dye & Durham as a "transformative" opportunity to expand its software offerings and help achieve its goal of $1 billion in adjusted earnings before interest, taxes, depreciation, and amortization.

Dye & Durham announced the acquisition of Link last December, and billed it as a "transformative" opportunity to expand its software offerings and help achieve its goal of $1 billion in adjusted earnings before interest, taxes, depreciation, and amortization.
 
However, the ACCC said earlier this month it thinks the deal "is likely to substantially lessen competition." The regulator stated it's concerned about the vertical integration of Link's 42.8 per cent stake in Pexa Group Ltd., which serves the Australia property market, with Dye & Durham existing services.
 
"We have significant preliminary concerns that this transaction would enable D&D and PEXA to engage in mutual preferential dealing that would hinder existing competition or raise barriers to entry in one or more markets in the conveyancing workflow," said ACCC Deputy Chair Mick Keogh in a June 16 release. At the time, Dye & Durham said it was evaluating the implications of the ACCC’s objection, and pledged to “work collaboratively with all parties involved.”
 
Through the close of trading Friday, Dye & Durham shares lost 49.5 per cent of their value this year. The broader S&P/TSX information technology subgroup tumbled almost 51 per cent over the same period.