Why is the Link share price crashing 20%?

Link shares are being hammered on Tuesday…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points
  • Link's shares have been smashed on Tuesday
  • Concerns that its takeover could crumble are weighing on its shares
  • This follows news out of the UK relating to the Woodford collapse

The Link Administration Holdings Ltd (ASX: LNK) share price is having a day to forget on Tuesday.

In morning trade, the administration services company's shares have returned from their trading halt and are down a massive 20% to $3.55.

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.

Image source: Getty Images

Why is the Link share price crashing?

The weakness in the Link share price on Tuesday has been driven by the release of an update on the proposed takeover of the company.

As you might have guessed from the share price reaction, things are not looking good for the transaction.

This is due to Link's Link Fund Solutions Limited (LFSL) business and its dealings with the UK Financial Conduct Authority (FCA) regarding LFSL's role as authorised corporate director to the LF Woodford Equity Income Fund. LFSL managed the now-collapsed Woodford Equity Income Fund.

According to the release, the FCA has approved Dye & Durham's proposed acquisition of LFSL. However, this is subject to a requirement that Dye & Durham commits to make funds available to meet any shortfall within LFSL in the amount available to cover the redress payments LFSL may be required to make.

The FCA's current view is that the redress payment in relation to the Woodford matters may be for an amount up to 306 million pounds (approximately A$519 million).

If Dye & Durham does not accept the requirement, then a condition under the scheme implementation deed may not be satisfied and the transaction could collapse.

As things stand, Dye & Durham has not yet indicated its position in relation to the FCA's requirement and Link will update the market as appropriate.

It is also worth noting that the FCA has revealed that this is not a final decision. Furthermore, LFSL does not agree with the FCA's view and intends to explore all options, including challenging any warning notice that may be issued.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Link Administration Holdings Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Mergers & Acquisitions

Two young male miners wearing red hardhats stand inside a mine and shake hands.
Mergers & Acquisitions

Fortescue shares lifting off today amid big copper news

With copper prices up 35% in a year, Fortescue is making some strategic moves.

Read more »

A man using a phone shouts and puts his hand out in a stop motion indicating the Yancoal trading halt today
Capital Raising

Magellan requests trading halt ahead of major announcement

Magellan enters a trading halt ahead of a proposed merger and capital raising.

Read more »

Ecstatic man giving a fist pump in an office hallway.
Mergers & Acquisitions

Pepper Money shares pop 25%, Challenger slips 3% on take-private deal

The offer represents a meaningful premium to where the stock had been trading prior to the speculation.

Read more »

A man looking at his laptop and thinking.
Materials Shares

Rio Tinto shares charge higher after Glencore merger collapses

The parties couldn't come to an agreement.

Read more »

Man sitting in a plane looking through a window and working on a laptop.
Mergers & Acquisitions

Qantas shares higher on Jetstar Japan sale

The Flying Kangaroo is saying sayonara to one of its brands.

Read more »

A man has a surprised and relieved expression on his face.
Mergers & Acquisitions

ASX tech stock rockets 50% on Aura takeover deal

Let's see what is getting investors excited on Tuesday.

Read more »

Engineer looking at mining trucks at a mine site.
Mergers & Acquisitions

Why the $260 billion Glencore merger is a 'high-stakes gamble' for Rio Tinto shares

Rio Tinto has until 5 February to clarify its $260 billion merger intentions with Glencore.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Mergers & Acquisitions

Rio Tinto shares sink 6% on Glencore merger bombshell

The market is reacting negatively to this potential mega-merger.

Read more »