Link Group to acquire Pepper European Servicing


John McMurtrie

Link Administration Holdings (ASX:LNK) has entered into a binding agreement to acquire Pepper European Servicing (PES) from Pepper Group for an upfront consideration of  €165 million (~A$266 million) and up to a further €35 million (~A$56 million) if certain total Assets Under Management (AUM) thresholds and growth milestones are met.

PES provides end-to-end loan servicing, advisory and asset management across both residential and commercial segments.  The business has well established operations in the UK and Ireland underpinned by longstanding customer relationships as well as a growing presence in the emerging markets of Spain, Greece and Cyprus.

At 31 December 2019, PES had total AUM of circa €40billion (~A$65 billion) and generated revenue of €92.9 million (~A$149.9 million) and achieved a normalised EBITDA of €20.1 million (~A$32.4 million) for the year ending 31 December 2019.  The upfront acquisition price implies an Enterprise Value (EV) to EBITDA multiple of 8.2x or 6.0x after taking into account anticipated efficiency benefits and deferred payments for existing AUM protection.

The transaction accretion to Link Group’s Operating EPS[1] is expected to be greater than 10% from year one (pre-efficiencies and one-offs) with anticipated synergies expected to deliver 5%-6% further earnings accretion upside.

The acquisition is subject to relevant regulatory approvals and is expected to complete in the second half of calendar 2020. On completion, the business will be integrated with Link Group’s BCM business.

Link Group’s Managing Director, John McMurtrie, said: “This is an attractive transaction for Link Group. It provides an opportunity to integrate two high-quality businesses to create a leading pan-European asset servicer and manager, that is well positioned to capture growth opportunities across the region.

“PES is highly aligned to Link Group’s existing BCM business in the UK and Ireland with strong annuity style earning characteristics.  The combined business will also be strategically positioned to capture further growth opportunities in other European markets with PES’ established operations in Spain, Greece and Cyprus complementing Link Group’s established operations in the Netherlands and Italy,” Mr McMurtrie said.

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