The UK Financial Conduct Authority (FCA) has announced that it will approve the takeover of Link Administration Holdings by Dye & Durham (D&D) if the Canadian firm agrees to cover up to $521 million in potential redress payments.
This condition relates to Link's role in the 2019 collapse of the LF Woodford Equity Income Fund (WEIF), which was managed by the firm's UK subsidiary Link Fund Solutions (LFS).
The FCA said it has investigated the circumstances leading to the suspension of the fund and will likely seek to force LFS to pay a financial penalty and/or consumer redress, but noted that this decision is not final and that LFS can challenge any proposed action.
“The FCA's current view is that the redress payment LFS could be required to pay may be up to £306 million. This redress proposal reflects the FCA's current view of LFS's failings in managing the liquidity of the WEIF,” the regulator said in a statement.
To receive the FCA's approval, D&D must commit to make funds available to meet any shortfall in the value of assets of LFS to cover any redress payments that may be required.
“This is the only condition the FCA has decided to impose to allow D&D to take control of the seven UK-authorised firms. The FCA has approved a change in control for the other six UK-regulated entities owned by Link Group,” it said.
In a statement on Monday, D&D stated that it was assessing the impact of the proposed conditions on its acquisition of Link.
“If Dye & Durham is unable to accept the FCA's conditions, one of the conditions precedent in the proposed Link Group acquisition's scheme implementation deed would not be capable of being satisfied,” the firm said.
D&D stated that it was in “active discussions” with Link to find a resolution that will allow the proposed transaction to proceed and added that it would provide an update on the acquisition and its timing “when it is legally required or otherwise appropriate to do so”.
Separately, in a statement to the ASX, Link stated that LFS does not agree with the FCA's view and will explore all options, including challenging any warning notice at the Regulatory Decisions Committee and through the Upper Tribunal.
“Link Group remains supportive of LFS considering all such options, and notes that LFS continues to trade profitably with a leading position in its market,” the firm said.
Link announced in July that it had accepted D&D's takeover bid of $4.81 per share, down from its original bid of $5.50 per share in December last year. The firm's share price fell by more than 20 per cent to $3.58 on Tuesday after exiting a trading halt.
Last week, the ACCC announced it will not oppose the deal after confirming it had accepted a court-enforceable undertaking from D&D to divest its Australian business.
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.