IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>The ACCC’s Statement of Issues noted “<em>significant preliminary competition concerns</em>” in relation to Dye &amp; Durham/DND’s acquisition of <a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Administration (LNK AU)</a>. The findings will be announced on 8 September.</li>
<li>There is no easy fix. We think that satisfying the ACCC requires a <a href="https://www.smartkarma.com/entities/pexa-group-ltd" target="_blank" data-smartkarma-citation="entities:34716:1" rel="noopener">PEXA Group (PXA AU)</a> stake disposal which could trigger a material adverse clause.</li>
<li>Link aims to proceed with the 13 July scheme meeting but this is a broken deal. While our SoTP suggests upside, there are no short-term positive catalysts.</li>
</ul>


The ACCC’s Statement of Issues noted “significant preliminary competition concerns” in relation to Dye &amp; Durham/DND’s acquisition of Link Administration (LNK AU). The findings will be announced on 8 September.
There is no easy fix. We think that satisfying the ACCC requires a PEXA Group (PXA AU) stake disposal which could trigger a material adverse clause.
Link aims to proceed with the 13 July scheme meeting but this is a broken deal. While our SoTP suggests upside, there are no short-term positive catalysts.


ACCC’s Concerns Likely to End in a Link-DND Deal Bust

<ul>
<li>DND’s 3QFY22 last night continued to suggest DND’s commitment to complete the <a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Administration Holdings (LNK AU)</a> acquisition.</li>
<li>DND management's messaging in the call downplayed the MAC risk of a contract renewal but shifted incrementally more bearish on the ACCC review, in our view.</li>
<li>The risk-reward calculus is now incrementally more positive. The gross spread is wide at 24.4% with the “deal-break” valuation of A$4.18 (-5% below the last close) limiting downside risk.</li>
</ul>


DND’s 3QFY22 last night continued to suggest DND’s commitment to complete the Link Administration Holdings (LNK AU) acquisition.
DND management's messaging in the call downplayed the MAC risk of a contract renewal but shifted incrementally more bearish on the ACCC review, in our view.
The risk-reward calculus is now incrementally more positive. The gross spread is wide at 24.4% with the “deal-break” valuation of A$4.18 (-5% below the last close) limiting downside risk.


Link Risk/Reward Benefits with the Messaging from DND’s Earnings Call

<ul>
<li>
<a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Administration Holdings (LNK AU)</a> claims to be not aware of any reason for today’s -15% share collapse. The market seems nervy that DND will exhibit buyer’s remorse. </li>
<li>The scheme consideration is now 2.6x DND’s market cap. The ACCC delayed review and the contract renewal MAC clause could be DND’s get-out-of-jail-free card for a lower price/walk-away. </li>
<li>Our “deal-break” SoTP valuation suggests a valuation of A$4.24 per share, which is broadly in line with the last close price. The next catalyst is DND’s results tomorrow.</li>
</ul>



Link Administration Holdings (LNK AU) claims to be not aware of any reason for today’s -15% share collapse. The market seems nervy that DND will exhibit buyer’s remorse. 
The scheme consideration is now 2.6x DND’s market cap. The ACCC delayed review and the contract renewal MAC clause could be DND’s get-out-of-jail-free card for a lower price/walk-away. 
Our “deal-break” SoTP valuation suggests a valuation of A$4.24 per share, which is broadly in line with the last close price. The next catalyst is DND’s results tomorrow.


Link’s Shares Collapse as Worries of Buyer’s Remorse Sets In

<ul>
<li>The scrip-heavy bid values <a href="https://www.smartkarma.com/entities/pendal-group-ltd" target="_blank" data-smartkarma-citation="entities:15795:1" rel="noopener">Pendal Group (PDL AU)</a> at A$6.23 based on the <a href="https://www.smartkarma.com/entities/perpetual-ltd" target="_blank" data-smartkarma-citation="entities:599:1" rel="noopener">Perpetual Ltd (PPT AU)</a> price on 1 April, a 39.2% premium to the unaffected price of A$4.48.  </li>
<li>The Pendal Board hints at opportunism. We agree as the Perpetual offer is unattractive in the context of historical multiples and share prices. </li>
<li>The bid lays a marker of Pendal’s inherent value, and we think another bidding round is possible. The gross spread to the offer at the last close prices is 12.1%.  </li>
</ul>


The scrip-heavy bid values Pendal Group (PDL AU) at A$6.23 based on the Perpetual Ltd (PPT AU) price on 1 April, a 39.2% premium to the unaffected price of A$4.48.  
The Pendal Board hints at opportunism. We agree as the Perpetual offer is unattractive in the context of historical multiples and share prices. 
The bid lays a marker of Pendal’s inherent value, and we think another bidding round is possible. The gross spread to the offer at the last close prices is 12.1%.  


Pendal’s Indicative Bid from Perpetual Is Underwhelming

<ul>
<li>
<a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Administration Holdings (LNK AU)</a> notes that the Dye &amp; Durham (DND) privatisation scheme remains on track for a June/July completion. Scheme document will be submitted to the ASIC shortly.</li>
<li>Link also noted that it was unable to reach a binding agreement with LC Financial Holding for the sale of the BCM business.</li>
<li>Key hurdles are ACCC clearance and the Woodford investigation. We would be buyers up to A$5.2 per share (implies 70% deal probability). </li>
</ul>



Link Administration Holdings (LNK AU) notes that the Dye &amp; Durham (DND) privatisation scheme remains on track for a June/July completion. Scheme document will be submitted to the ASIC shortly.
Link also noted that it was unable to reach a binding agreement with LC Financial Holding for the sale of the BCM business.
Key hurdles are ACCC clearance and the Woodford investigation. We would be buyers up to A$5.2 per share (implies 70% deal probability). 


Link's Privatisation by DND on Track to Complete in June/July

Australia

AMP Limited provides life insurance, superannuation, asset management products, pensions, retirement planning and other diversified financial services throughout Australia and New Zealand.  The Company services individual customers, small businesses, corporations and associated superannuation funds.

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AMP Ltd (AMP AU)

ACCC’s Concerns Likely to End in a Link-DND Deal Bust

The deal is all but bust due to the ACCC's concerns. Our SoTP is A$3.74 which is a 12% upside to the last close. However, we would stay away as...

Arun George

Link Risk/Reward Benefits with the Messaging from DND’s Earnings Call

The risk-reward calculus gets a lift from the DND 3Q call. The gross spread is wide at 24.4% with the “deal-break” valuation of A$4.18 limiting...

Arun George

Link’s Shares Collapse as Worries of Buyer’s Remorse Sets In

Shares collapsed today on concerns that the deal is on shaky grounds as DND may push for a lower price or walk away. Link is now trading at our...

Arun George

Pendal’s Indicative Bid from Perpetual Is Underwhelming

The offer consists of a scrip component (1 Perpetual share for every 7.5 Pendal share) and a cash component (A$1.67). The Pendal Board hints at...

Arun George

Link's Privatisation by DND on Track to Complete in June/July

Link notes that the Dye & Durham privatisation scheme remains on track for a June/July completion. Key hurdles are ACCC clearance and the Woodford...

Arun George

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