A conditional takeover bid to buy Link Fund Solutions’ Australian parent company could create additional uncertainty for investors who remain trapped in Neil Woodford’s former fund.
In a filing on the Australian Securities Exchange, Link Group confirmed a consortium of private equity firms spearheaded by Pacific Equity Partners (PEP) and Carlyle Group had offered to snap up 100% of the company’s shares for A$2.8bn (£1.6bn).
The proposal is subject to a number of conditions including due diligence checks, securing debt financing and regulatory approval from the Foreign Investment Review Board.
Shares in Link Group shot up over 25% to A$4.99 on the back of the news.
If completed the deal would represent a full circle moment for Link Group and see it fall back into the hands of PEP which had owned the business for a decade before floating it in 2015.
Unclear how Link takeover would impact Woodford investors
It also raises questions about the future of Link’s UK-based authorised corporate director business, Link Fund Solutions (LFS), which has been thrust into the spotlight since the blowup of the Woodford Equity Income fund.
The Financial Conduct Authority is currently investigating the events leading up to the fund’s suspension last June, which trapped £3.7bn of client money, and subsequent liquidation but has yet to hold anyone to account.
As ACD Link was responsible for making sure Woodford adhered to the rules around risk management and liquidity. It has been overseeing the wind-up of the fund, renamed LF Equity Income, for almost a year now. The process has cost investors £16m so far and Link has warned it could be another year before the remaining £288m assets are returned to unit holders.
AJ Bell head of active portfolios Ryan Hughes said at this stage it is unclear whether the takeover would have an impact on investors in Woodford’s former fund.
But “with the UK element of the business still very much in the spotlight for its involvement with the Woodford fund, I’m sure any potential bidders will look hard at the potential fallout for the UK part of the business and factor that into any valuation,” he added.
PEP and Carlyle have offered to buy Link Group for A$5.20 per share which is well below its IPO price of A$6.37.
Link Fund Solutions unlikely to get left behind
7IM senior portfolio manager Peter Sleep thinks it is unlikely LFS will be carved out and left behind in the event the takeover goes ahead.
PEP will be well aware of the risks associated with the UK business, Sleep said, and because Link acquired LFS from Capita in 2017 it will be buying an enlarged business for less than they sold it five years ago.
Willis Owen head of personal investing Adrian Lowcock said LFS is just a small part of the much wider Australian parent company and as such, the problems arising from the Woodford scandal would not be “necessarily material, nor significant enough to have much to do with a possible bid”.
“The role Link Group plays in the financial services industry and the growing importance of data and analytics makes the company a potentially very interesting and valuable asset, so from that perspective you can see why a private equity firm might be interested.”
Link did not mention in the regulatory filing what would happen to LFS in the event of a takeover.
It said the board would consider the proposal with input from financial advisers Macquarie Capital and UBS and legal adviser Herbert Smith Freehills but added there is no certainty discussions with the consortium would result in a deal being made.
Portfolio Adviser has contacted LFS and is awaiting a reply.
