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>
<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>’s 1HFY22 results on 24 February stated that the Dye &amp; Durham/DND's privatisation scheme remains on track to complete in June/July. </li>
<li>Key hurdles are ACCC clearance and the Woodford investigation. Key catalysts are the scheme booklet (in the coming weeks) and an agreement to sell BCM. </li>
<li>We would be buyers up to A$5.2 per share (implies 70% deal probability). The gross and annualised spread for a 31 July implementation is 8.6% and 23.8%, respectively. </li>
</ul>



Link Administration Holdings (LNK AU)’s 1HFY22 results on 24 February stated that the Dye &amp; Durham/DND's privatisation scheme remains on track to complete in June/July. 
Key hurdles are ACCC clearance and the Woodford investigation. Key catalysts are the scheme booklet (in the coming weeks) and an agreement to sell BCM. 
We would be buyers up to A$5.2 per share (implies 70% deal probability). The gross and annualised spread for a 31 July implementation is 8.6% and 23.8%, respectively. 


<ul>
<li>Dye &amp; Durham/DND’s base (A$5.50 cash per share) + A$0.03 per share interim dividend offer of A$5.53 per share, a 27.7% premium to the unaffected price of A$4.33 (4 November). </li>
<li>At <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> last close, <a href="https://www.smartkarma.com/entities/carlyle-group-inc" target="_blank" data-smartkarma-citation="entities:33402:1" rel="noopener">Carlyle Group Inc (CG US)</a>’s offer is worth A$5.51 per share. Carlyle’s long interest in Link suggests that it could improve its offer. </li>
<li>We think that the DND offer is reasonable in the context of historical multiples. Nevertheless, there is a good probability that Carlyle tries to regain the upper hand.</li>
</ul>


Dye &amp; Durham/DND’s base (A$5.50 cash per share) + A$0.03 per share interim dividend offer of A$5.53 per share, a 27.7% premium to the unaffected price of A$4.33 (4 November). 
At PEXA Group (PXA AU) last close, Carlyle Group Inc (CG US)’s offer is worth A$5.51 per share. Carlyle’s long interest in Link suggests that it could improve its offer. 
We think that the DND offer is reasonable in the context of historical multiples. Nevertheless, there is a good probability that Carlyle tries to regain the upper hand.


<p><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> announced that it received a non-binding indicative proposal from <a href="https://www.smartkarma.com/entities/carlyle-group-inc" target="_blank" data-smartkarma-citation="entities:33402:1" rel="noopener">Carlyle Group Inc (CG US)</a>. Carlyle will offer A$3.00 cash per share plus a pro-rata distribution of Link’s 42.8% shareholding in <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> (worth A$2.38 per Link share at PEXA’s share price of A$16.23 on 4 November). The total consideration of A$5.38 per share is a 24.2% premium to the unaffected price of A$4.33 (on 4 November). Carlyle’s core Link (excluding PEXA stake) value of A$3.00 per share is a 53.8% premium to the implied core Link share price of A$1.95 per share (on 4 November). </p><p>Link is no stranger to bids and received several bids in the recent past, including from Carlyle. Carlyle and Pacific Equity Partners made an indicative A$5.20 per share offer on 12 October 2020, which was later raised to A$5.40 on 26 October but withdrawn on 28 April 2021. <a href="https://www.smartkarma.com/entities/ss-c-technologies-holdings" target="_blank" data-smartkarma-citation="entities:3464:1" rel="noopener">SS&amp;C Technologies (SSNC US)</a> lobbed an A$5.65 per share offer on 7 December 2020 but withdrew the offer on 3 January 2021. Also, <a href="https://www.smartkarma.com/entities/kkr-co-inc" target="_blank" data-smartkarma-citation="entities:27333:1" rel="noopener">KKR &amp; Co Inc (KKR US)</a> and <a href="https://www.smartkarma.com/entities/domain-holdings-australia-ltd" target="_blank" data-smartkarma-citation="entities:26033:1" rel="noopener">Domain Holdings Australia (DHG AU)</a> proposed to acquire PEXA for A$3.1 billion on 27 May 2021 which was declined in favour of a separate listing for PEXA.  </p><p>Link’s Board has argued that the previous bids did not represent compelling value and sought to generate shareholder returns through the PEXA IPO and outlining ambitious FY26 targets in a November investor day. However, PEXA’s market cap of A$2.8 billion at last close is below KKR’s bid of A$3.1 billion. The lukewarm share price response (shares down -2% on the following day) to the investor day points to low confidence that the targets can be reached. </p><p>Carlyle’s latest offer is subject to due diligence, execution of transaction documents and securing debt financing. Due diligence should be short due to Carlyle’s access to the due diligence materials through its previous bid.  </p><div class="content-highlight"><p>The Board’s previous track record of knocking back bids has resulted in Link’s last close price of A$4.70 trading at a wide 14.5% gross spread to the indicative offer of A$5.38 per share. However, due to the Board’s failure to generate shareholder value and there no longer being a debate on PEXA valuation (as PEXA is now listed), the Board will face pressure to engage with Carlyle. We also think that Carlyle has room to sweeten its bid as its latest bid values core Link at A$3.00 per share, which is 21% below its previous offer which valued core Link at A$3.80 per share. </p></div>

Link Administration Holdings (LNK AU) announced that it received a non-binding indicative proposal from Carlyle Group Inc (CG US). Carlyle will offer A$3.00 cash per share plus a pro-rata distribution of Link’s 42.8% shareholding in PEXA Group (PXA AU) (worth A$2.38 per Link share at PEXA’s share price of A$16.23 on 4 November). The total consideration of A$5.38 per share is a 24.2% premium to the unaffected price of A$4.33 (on 4 November). Carlyle’s core Link (excluding PEXA stake) value of A$3.00 per share is a 53.8% premium to the implied core Link share price of A$1.95 per share (on 4 November). Link is no stranger to bids and received several bids in the recent past, including from Carlyle. Carlyle and Pacific Equity Partners made an indicative A$5.20 per share offer on 12 October 2020, which was later raised to A$5.40 on 26 October but withdrawn on 28 April 2021. SS&amp;C Technologies (SSNC US) lobbed an A$5.65 per share offer on 7 December 2020 but withdrew the offer on 3 January 2021. Also, KKR &amp; Co Inc (KKR US) and Domain Holdings Australia (DHG AU) proposed to acquire PEXA for A$3.1 billion on 27 May 2021 which was declined in favour of a separate listing for PEXA.  Link’s Board has argued that the previous bids did not represent compelling value and sought to generate shareholder returns through the PEXA IPO and outlining ambitious FY26 targets in a November investor day. However, PEXA’s market cap of A$2.8 billion at last close is below KKR’s bid of A$3.1 billion. The lukewarm share price response (shares down -2% on the following day) to the investor day points to low confidence that the targets can be reached. Carlyle’s latest offer is subject to due diligence, execution of transaction documents and securing debt financing. Due diligence should be short due to Carlyle’s access to the due diligence materials through its previous bid.  The Board’s previous track record of knocking back bids has resulted in Link’s last close price of A$4.70 trading at a wide 14.5% gross spread to the indicative offer of A$5.38 per share. However, due to the Board’s failure to generate shareholder value and there no longer being a debate on PEXA valuation (as PEXA is now listed), the Board will face pressure to engage with Carlyle. We also think that Carlyle has room to sweeten its bid as its latest bid values core Link at A$3.00 per share, which is 21% below its previous offer which valued core Link at A$3.80 per share. 

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<p>Investment administrator <a href="https://www.smartkarma.com/entities/praemium-ltd" target="_blank" data-smartkarma-citation="entities:9360:1" rel="noopener">Praemium Ltd (PPS AU)</a> has rejected a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02446233-3A580069?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">non-binding proposal</a> from key competitor <a href="https://www.smartkarma.com/entities/netwealth-group-ltd" target="_blank" data-smartkarma-citation="entities:25951:1" rel="noopener">Netwealth (NWL AU)</a>.</p>
<p>By way of a Scheme, Netwealth was offering 1 new NWL share for every 11.96 PPS shares, or an indicative Offer consideration of A$1.50, a 29% premium to last close, and a lifetime high.</p>
<p>PPS' board said the Proposal did not appropriately value Praemium’s current performance, near-term trajectory, growth momentum, and was not representative of recent transaction premia in the Australian platform and funds administration space.</p>
<p>This space is indeed hot. When PPS peer <a href="https://www.smartkarma.com/entities/onevue-holdings-ltd" target="_blank" data-smartkarma-citation="entities:24327:1" rel="noopener">Onevue Holdings (OVH AU)</a> was taken private in the middle of last year (as discussed by <a href="https://www.smartkarma.com/profiles/janaghan-jeyakumar-cfa" target="_blank" data-smartkarma-citation="accounts:3173" rel="noopener">Janaghan Jeyakumar</a> in<em><a href="https://skr.ma/rGK8k" target="_blank" rel="noopener"> OneVue-Iress: Australian Deal Trading Wide</a></em>), the independent expert flagged (<a href="https://onevue.com.au/wp-content/uploads/2020/09/Scheme-Booklet_final.pdf" target="_blank" rel="noopener">page 132</a>) 12 peers (including PPS and NWL). Of the remaining 10:</p>
<ul>
<li>
<a href="https://www.smartkarma.com/entities/powerwrap-ltd" target="_blank" data-smartkarma-citation="entities:30664:1" rel="noopener">Powerwrap Ltd (PWL AU)</a> was taken private (by PPS) last October;</li>
<li>
<a href="https://www.smartkarma.com/entities/xplore-wealth-ltd" target="_blank" data-smartkarma-citation="entities:12161:1" rel="noopener">xplore (XPL AU)</a> was taken private by <a href="https://www.smartkarma.com/entities/hub24-ltd" target="_blank" data-smartkarma-citation="entities:12336:1" rel="noopener">Hub24 Ltd (HUB AU)</a> in <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02349028-2A1284538?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">March</a>;</li>
<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> was subject to Offers from SS&amp;C and Carlyle, but in May this year opted to go the IPO route for PEXA, the digital property settlement platform - <em><a href="https://skr.ma/CrBHo" target="_blank" rel="noopener">Link Admin (LNK AU) Goes IPO Route For PEXA Afterall</a>;</em>
</li>
<li>
<a href="https://www.smartkarma.com/entities/iress-ltd" target="_blank" data-smartkarma-citation="entities:15342:1" rel="noopener">Iress Ltd (IRE AU)</a> backed an Offer from EQT but the two were <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02422609-3A576043?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">unable to agree</a> to a transaction in September - <em><a href="https://skr.ma/Rm5oC" target="_blank" rel="noopener">Iress (IRE AU) Accepts EQT's Latest Proposal</a></em>;</li>
<li>
<a href="https://www.smartkarma.com/entities/mainstream-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:30611:1" rel="noopener">Mainstream Group Holdings Ltd (MAI AU)</a> was taken private by Apex last month  - <em><a href="https://skr.ma/fu9ej" target="_blank" rel="noopener">Mainstream (MAI AU): Apex on Top Again as Bidding War Continues....</a></em>; and</li>
<li>
<a href="https://www.smartkarma.com/entities/hub24-ltd" target="_blank" data-smartkarma-citation="entities:12336:1" rel="noopener">Hub24 Ltd (HUB AU)</a> and <a href="https://www.smartkarma.com/entities/class-ltd" target="_blank" data-smartkarma-citation="entities:24287:1" rel="noopener">Class Ltd (CL1 AU)</a> entered into a Scheme Implementation Deed last month - <em><a href="https://skr.ma/odCXE" target="_blank" rel="noopener">Class - Hub24: Scheme Trading Wide</a></em>.</li>
</ul>
<p>Given the above, you can build an understanding why PPS would hold out for a superior Offer.</p>
<p>More below the fold.</p>

Investment administrator Praemium Ltd (PPS AU) has rejected a non-binding proposal from key competitor Netwealth (NWL AU).
By way of a Scheme, Netwealth was offering 1 new NWL share for every 11.96 PPS shares, or an indicative Offer consideration of A$1.50, a 29% premium to last close, and a lifetime high.
PPS' board said the Proposal did not appropriately value Praemium’s current performance, near-term trajectory, growth momentum, and was not representative of recent transaction premia in the Australian platform and funds administration space.
This space is indeed hot. When PPS peer Onevue Holdings (OVH AU) was taken private in the middle of last year (as discussed by Janaghan Jeyakumar in OneVue-Iress: Australian Deal Trading Wide), the independent expert flagged (page 132) 12 peers (including PPS and NWL). Of the remaining 10:


Powerwrap Ltd (PWL AU) was taken private (by PPS) last October;

xplore (XPL AU) was taken private by Hub24 Ltd (HUB AU) in March;

Link Administration Holdings (LNK AU) was subject to Offers from SS&amp;C and Carlyle, but in May this year opted to go the IPO route for PEXA, the digital property settlement platform - Link Admin (LNK AU) Goes IPO Route For PEXA Afterall;


Iress Ltd (IRE AU) backed an Offer from EQT but the two were unable to agree to a transaction in September - Iress (IRE AU) Accepts EQT's Latest Proposal;

Mainstream Group Holdings Ltd (MAI AU) was taken private by Apex last month  - Mainstream (MAI AU): Apex on Top Again as Bidding War Continues....; and

Hub24 Ltd (HUB AU) and Class Ltd (CL1 AU) entered into a Scheme Implementation Deed last month - Class - Hub24: Scheme Trading Wide.

Given the above, you can build an understanding why PPS would hold out for a superior Offer.
More below the fold.

Praemium (PPS AU) Spurns Netwealth's (NWL AU) Proposal

Over the Wire Holdings Ltd / Event-Driven

<div>
<p>There have been numerous take-private transactions for listed-Aussie IT service companies in recent years, some of which have been discussed on Smartkarma. These include...</p>
<ul>
<li>the November 2015 <a href="https://www.asx.com.au/asxpdf/20151125/pdf/4338cczfxtqgs3.pdf" target="_blank" rel="noopener">Scheme</a> for <a href="https://www.smartkarma.com/entities/uxc-ltd" target="_blank" data-smartkarma-citation="entities:965:1" rel="noopener">UXC Ltd (UXC AU)</a>;</li>
<li>the September 2016 <a href="https://www.asx.com.au/asxpdf/20161102/pdf/43clwcp6rxzv35.pdf" target="_blank" rel="noopener">Scheme</a> for <a href="https://www.smartkarma.com/entities/asg-group-ltd" target="_blank" data-smartkarma-citation="entities:7590:1" rel="noopener">ASG Group Ltd (ASZ AU)</a>;</li>
<li>the October 2019 <a href="https://www.asx.com.au/asxpdf/20191218/pdf/44cpl5rwnq34zq.pdf" target="_blank" rel="noopener">Scheme</a> for <a href="https://www.smartkarma.com/entities/csg-ltd" target="_blank" data-smartkarma-citation="entities:12317:1" rel="noopener">CSG Ltd (CSV AU)</a>;</li>
<li>the <a href="https://www.asx.com.au/asxpdf/20201030/pdf/44pcdfqrs4wzm0.pdf" target="_blank" rel="noopener">September 2020</a> Scheme for <a href="https://www.smartkarma.com/entities/dws-ltd" target="_blank" data-smartkarma-citation="entities:10622:1" rel="noopener">DWS Ltd (DWS AU)</a>, discussed by <a href="https://www.smartkarma.com/profiles/janaghan-jeyakumar-cfa" target="_blank" data-smartkarma-citation="accounts:3173" rel="noopener">Janaghan Jeyakumar</a> in <a href="https://skr.ma/kJomK" target="_blank" rel="noopener"> <em>HCL-DWS(DWS AU): Cash Deal Trading Wide</em></a>;</li>
<li>the September 2020 <a href="https://www.asx.com.au/asxpdf/20201030/pdf/44pc22zh1mh1f4.pdf" target="_blank" rel="noopener">Scheme</a> for <a href="https://www.smartkarma.com/entities/citadel-group-ltd-the" target="_blank" data-smartkarma-citation="entities:14087:1" rel="noopener">Citadel Group (CGL AU)</a>, discussed in <em><a href="https://skr.ma/i6V5x" target="_blank" rel="noopener">Citadel Group: Private Equity Partners' Offer</a></em>;</li>
<li>Capgemini's November 2020 <a href="https://assets-global.website-files.com/5eb3a33204ebab1ecd0b72c9/60176e3f9a311b7f4cb909f6_Scheme%20Booklet%20-%20RXP%20Group%20ASX.pdf" target="_blank" rel="noopener">Scheme</a> for <a href="https://www.smartkarma.com/entities/rxp-services-ltd" target="_blank" data-smartkarma-citation="entities:15047:1" rel="noopener">RXP Services (RXP AU)</a>, and its follow up Scheme in July this year for <a href="https://www.smartkarma.com/entities/empired-ltd" target="_blank" data-smartkarma-citation="entities:9406:1" rel="noopener">Empired Ltd (EPD AU)</a> (<em><a href="https://skr.ma/YWsn3" target="_blank" rel="noopener">Empired (EPD AU): Capgemini's Full Offer</a></em>)); and</li>
<li>Norway's Crayon Group Holdings' July 2021 <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02418756-3A575319?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">Scheme</a> for <a href="https://www.smartkarma.com/entities/rhipe-ltd" target="_blank" data-smartkarma-citation="entities:19128:1" rel="noopener">rhipe Ltd (RHP AU)</a> - see <em><a href="https://skr.ma/9ysNF" target="_blank" rel="noopener">Rhipe (RHP AU): Done Deal As Scheme Booklet Dispatched</a></em>.    </li>
</ul>
<div class="content-highlight">
<p>When <a href="https://www.smartkarma.com/entities/bulletproof-group-ltd" target="_blank" data-smartkarma-citation="entities:3324:1" rel="noopener">Bulletproof (BPF AU)</a>, an IT play, was taken private in 2018, the independent expert cited <a href="https://www.asx.com.au/asxpdf/20180410/pdf/43t32h54tfrk38.pdf" target="_blank" rel="noopener">10 peers</a> (page 28). Five of those peers have been taken private.</p>
<p>Now we have a proposal for the sixth. </p>
</div>
<p><a href="https://www.smartkarma.com/entities/aussie-broadband-pty-ltd" target="_blank" data-smartkarma-citation="entities:30812:1" rel="noopener">Aussie Broadband Pty Ltd (ABB AU)</a> has <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02439848-2A1332945?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">offered</a> to acquire Brisbane-based telecommunications and IT solutions provider <a href="https://www.smartkarma.com/entities/over-the-wire-holdings-ltd" target="_blank" data-smartkarma-citation="entities:30653:1" rel="noopener">Over the Wire Holdings Ltd (OTW AU)</a> by way of a Scheme at $5.75/share.</p>
<p>This is an unsolicited and non-binding proposal. Via a process deed filed on 16 October, OTW said it has granted Aussie Broadband to undertake due diligence and negotiate transaction documentation. That process period ends on the 30 November.</p>
<p>More below the fold.</p>
</div>
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<p></p>
</div>
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<p></p>
</div>


There have been numerous take-private transactions for listed-Aussie IT service companies in recent years, some of which have been discussed on Smartkarma. These include...

the November 2015 Scheme for UXC Ltd (UXC AU);
the September 2016 Scheme for ASG Group Ltd (ASZ AU);
the October 2019 Scheme for CSG Ltd (CSV AU);
the September 2020 Scheme for DWS Ltd (DWS AU), discussed by Janaghan Jeyakumar in  HCL-DWS(DWS AU): Cash Deal Trading Wide;
the September 2020 Scheme for Citadel Group (CGL AU), discussed in Citadel Group: Private Equity Partners' Offer;
Capgemini's November 2020 Scheme for RXP Services (RXP AU), and its follow up Scheme in July this year for Empired Ltd (EPD AU) (Empired (EPD AU): Capgemini's Full Offer)); and
Norway's Crayon Group Holdings' July 2021 Scheme for rhipe Ltd (RHP AU) - see Rhipe (RHP AU): Done Deal As Scheme Booklet Dispatched.    


When Bulletproof (BPF AU), an IT play, was taken private in 2018, the independent expert cited 10 peers (page 28). Five of those peers have been taken private.
Now we have a proposal for the sixth. 

Aussie Broadband Pty Ltd (ABB AU) has offered to acquire Brisbane-based telecommunications and IT solutions provider Over the Wire Holdings Ltd (OTW AU) by way of a Scheme at $5.75/share.
This is an unsolicited and non-binding proposal. Via a process deed filed on 16 October, OTW said it has granted Aussie Broadband to undertake due diligence and negotiate transaction documentation. That process period ends on the 30 November.
More below the fold.










Over The Wire (OTW AU): The Latest Aussie IT Play

Australia

Iress Limited provides real-time information services to businesses that specialize in the equity, equity options and future information markets in Australia and New Zealand. The Group supplies a range of pricing data, charting, news and equity and equity derivatives and also offers real-time trading tools, including a domestic order routing product and financial

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Iress Ltd (IRE AU)

Link's Offer Spread Risk/Reward

Key hurdles are ACCC clearance and the Woodford investigation. Key catalysts are the scheme booklet and an agreement to sell BCM. The annualised...

Arun George

Link Enters a SID with Dye & Durham

DND’s base + interim dividend offer of A$5.53 per share is a 27.7% premium to the unaffected price of A$4.33. There is a good chance that Carlyle...

Arun George

Link Gets Another Offer from Carlyle

Link received another offer from Carlyle worth A$5.38 per share. Carlyle has room to sweeten its bid as its latest bid values core Link at A$3.00...

Arun George

Praemium (PPS AU) Spurns Netwealth's (NWL AU) Proposal

Currently trading 2.8% through terms. Apart from the premium to last close, the proposal for Praemium appears full. Yet this sector is very much...

David Blennerhassett

Over The Wire (OTW AU): The Latest Aussie IT Play

Given DD has been afforded, $5.75/share is probably approaching full value Currently trading at a gross spread of 4.5%. That looks a tad tight,...

David Blennerhassett

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