Australia’s Link Administration (LNK.AX) said on Wednesday Britain’s financial regulator may fine the company’s UK unit 50 million pounds ($56.86 million) in addition to potential 306.1 million pounds in redress over its management of a now defunct fund.
The potential fine and redress payment casts doubts over the share registry firm’s nine-month-long buyout talks with Canada’s Dye & Durham (DND) (DND.TO), which has already slashed its offer by a fifth from an agreed price to A$1.95 billion ($1.30 billion).
“This has gone from bad to worse for Link. Link’s announcement today makes it clear that it now faces a A$605 million liability,” DND’s chief communications officer, Wojtek Dabrowski, said.
“Given what was disclosed in Link’s most recent financial statements, it’s not quite clear how they’re going to pay this.”
Link shares fell as much as 5.2% to A$3.26, hitting their lowest since June 16, and trading at a discount of 14.4% to the latest buyout offer of A$3.81 apiece.
The increasing roadblocks for Link-DND buyout underscore the growing problem of execution risks in Australian mergers and acquisitions in a year marked with share market gyrations and hard-line regulatory approach.
UK-based Link Fund Solutions Ltd (LFSL), which managed the LF Woodford Equity Income Fund (WEIF), is being investigated by Britain’s Financial Conduct Authority (FCA) for the fund’s collapse in June 2019.
The FCA said on Wednesday that Link has 14 days to say if it will challenge its draft fine before an independent committee, or resolve the case by agreement and thereby earn a discount.
The FCA said its redress figure does not reflect any amount which may be owed to anyone else, including members of the fund, as a result of potential wrongdoing by other parties.
“FCA-determined redress is based on misconduct rather than losses caused by fluctuations in the market value or price of investments,” the watchdog said.
Link said on Wednesday it had not made any commitment to fund or financially support LFSL, and considered any liabilities related to the probe to be confined to the fund manager.
LFSL was the authorised corporate director for the 3.7-billion-pounds WEIF, which closed in October 2019, and whose assets were picked by veteran star manager Neil Woodford.
Woodford was criticised by lawmakers and investors for holding a large number of illiquid assets, making it hard to meet redemption calls after months of underperformance.
($1 = 0.8794 pounds)
($1 = 1.4961 Australian dollars)