Canada’s D&D cancels takeover bid for Australia’s Link under regulator probe

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Sep 19 (Reuters) – Canadian legal software maker Dye & Durham (D&D) (DND.TO) has slashed the already agreed takeover price for Australian rival Link Administration Holdings (LNK.AX) by a fifth due to regulatory issues, putting the long-running deal talks in doubt.

A month after shareholders of the target company backed an already reduced A$2.47 billion ($1.66 billion) cash sale to D&D, Canadians said they now want to pay just 1. 95 billion Australian dollars, citing a regulator investigation in Britain that could leave Lien forced to pay 306 million pounds ($349.91 million) in damages.

Link said he couldn’t recommend the latest version of the offering and plans to “evaluate alternatives for the business” if it fails completely. Linkage shares were down 3.5% in morning trade, against a flat overall market (.AXJO).

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D&D’s late change and Link’s response underscores the growing problem of execution risk in Australian M&As in a year where equity market swings have hurt corporate valuations and regulators are adopting a increasingly harsh approach.

A week earlier, one of Australia’s biggest private equity buyouts hit a stalemate when buyout specialist KKR withdrew an indicative bid for hospital operator Ramsay Health Care (RHC.AX) when the target saw a sharp decline in earnings. Read more

The takeover of Link caused turmoil when Britain’s Financial Conduct Authority (FCA) said a local unit of the Australian firm may have to compensate more than 300,000 investors exposed to a collapsed fund it managed. Read more

In a statement, D&D said it wanted to reduce the cash offer price by the maximum amount of compensation it would have to pay investors in the fund, then pay the rest later if there was no payment.

“Our revised proposal guarantees Link Group shareholders the same economic value as our previous offer, while taking into account the impact of potential liability,” said D&D CEO Matthew Proud.

“In effect, our proposal caps the amount of that liability…and helps Link Group avoid what could be years of costly litigation with an unknown outcome and significant and ongoing reputational damage.”

($1 = 1.4870 Australian dollars)

($1 = 0.8745 pounds)

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Reporting by Byron Kaye in Sydney and Sameer Manekar in Bangalore; Edited by Richard Chang and Lincoln Feast.

Our standards: The Thomson Reuters Trust Principles.

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