The Link Administration Holdings Ltd (ASX: LNK) share price is down more than 4% after giving a PEXA update.
PEXA update
Link has been looking at the possibility of a trade sale and viability of an initial public offering (IPO) to maximise the value of Link’s investment in PEXA.
Currently Link owns a 44.18% interest in Torrens Group Holdings, which is the ultimate holding company of PEXA.
Link told the market that after a cornerstone bookbuild process, it has signed an underwriting agreement for a proposed PEXA IPO. The underwritten price of the IPO implies an enterprise value for PEXA of $3.3 billion. In other words, it’s planning to list PEXA on the ASX and it has started the process.
Before any scale back from this process, Link said its shareholding in PEXA will increase from 44% to 47%. Link will receive a minimum of $50 million in cash as a result of the IPO process, plus any proceeds received through the scale back.
The ASX listing date for the proposed PEXA IPO is near the end of June 2021, subject to satisfying ASX admission requirements.
Why did Link go for this option?
The Link board unanimously concluded that keeping exposure to PEXA, whilst also realising a transparent valuation through a listing and flexibility to monetise its interest over time, was in the best interests of shareholders. They have essentially rejected the takeover offer from KKR.
Management comments
Link CEO and Managing Director Vivek Bhatia said: “This is an outstanding outcome for the shareholders of Link Group. In October 2020, the Link Group Board considered that the private equity consortium’s bid for Link Group, including its interest in PEXA, significantly undervalued Link Group’s business including the PEXA asset. This has been now demonstrated through the book build undertaken on Friday valuing PEXA at $3.3 billion, representing an increase of approximately 70% on the consortium’s implied valuation of PEXA at $1.95 billion.”
Summary thoughts on Link and the share price
The PEXA valuation makes up a significant part of the Link valuation and offers plenty of growth, so I think it’s a good thing that Link is holding on.
However, the rest of the business is important to the valuation, so I’m not sure if the overall Link business is a buy after the recovery in recent months.
