KKR-Domain’s $3.1b offer upends PEXA process

Simon EvansSenior reporter

May 28, 2021 – 9.39am

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Private equity group KKR and its junior consortium partner Domain Holdings are trying to force a quick decision by the owners of electronic conveyancing group PEXA as it heads into the final stages of a dual-track strategic review, weighing up whether to offload the business in a trade sale, or float the entity onto the ASX.

Link Group, the largest shareholder in PEXA with 44.2 per cent, said both parts of the dual-track process are continuing but it is considering a $3.1 billion KKR-Domain buyout proposal, which has a deadline of 5pm on Sunday for acceptance. Link said the enterprise value of the proposal by KKR-Domain is $3 billion, plus $126 million in cash on the balance sheet. KKR is the major driver and makes up 90 per cent of the KKR-Domain consortium.

The KKR-Domain consortium is competing against rivals including Canadian group Dye & Durham in the trade sale part of the dual-track process. Dye & Durham was thought to be accelerating its number-crunching on Friday on its own buyout proposal for PEXA which may be lodged by Sunday too. But the Canadian group could run into issues with the Australian Competition and Consumer Commission which in late March began a review into Dye & Durham’s proposed separate acquisition of property software group GlobalX.

Link Group is the largest shareholder in PEXA with 44.2 per cent, while Morgan Stanley Infrastructure Partners holds 40 per cent and CBA has 15.8 per cent.

The PEXA shareholders have four investment banks working on a potential IPO. They sent pathfinder prospectuses to potential cornerstone backers this week.

Domain, the online real estate group, told the ASX on Friday that it was part of a consortium to buy PEXA under a proposal where it could potentially end up with a 10 per cent stake in PEXA as part of the broader deal.

It was responding to a report by The Australian Financial Review’s Street Talk column on Thursday that the consortium led by private equity group KKR had made an offer with a short deadline for acceptance.

Link Group owns 44.2 per cent of the PEXA electronic conveyancing business which is growing fast and will soon set up shop in the UK. Fairfax Media

Domain told the ASX on Friday that it “regularly assesses investment opportunities to accelerate the growth of its marketplace model”.

“Domain is participating in a process as part of a consortium with respect to potentially acquiring a 10 per cent interest in Torrens Group Holdings Pty Ltd that owns PEXA,” the company said.

Domain said it would keep the market updated. Nine, publisher of The Australian Financial Review, is a majority shareholder in Domain.

Under the KKR-Domain bid, PEXA’s two biggest shareholders, Link Group and Morgan Stanley Infrastructure Partners, would receive cash for their respective stakes, while Commonwealth Bank would retain either all or most of its 15.8 per cent stake in PEXA.

Link told the ASX on Thursday night that the proposal was being considered and had a number of conditions including Foreign Investment Review Board approval, and the IPO not proceeding. “As no decision has been made, both the trade sale process and exploration of the viability of an IPO continue to proceed,” Link said.

Link shares gained 5 per cent to $5.45 by the close of trading on Friday. The PEXA stake is the jewel in the Link business, which also comprises share registry operations and superannuation administration.

PEXA’s electronic conveyancing platform handles more than 80 per cent of all property transactions in Australia and the group wants to be at the forefront of a similar modernisation of systems in Britain, New Zealand and Canada.

PEXA is preparing to set up in Britain to try to emulate the big shift to digital conveyancing which it pioneered in Australia.

Link chief executive Vivek Bhatia said on April 28 the group had an “open mind” on whether a trade sale or an IPO was the best option, and that decisions would be made in June.

He also said expansion plans for PEXA are gathering speed and the group was in active conversations with several lenders in the UK.

PEXA’s platform is used by land title offices, conveyancers and real estate agents and about 150 different banks and financial institutions in Australia. PEXA in late April signed an agreement with global software consultancy ThoughtWorks to work closely with it on the expansion in Britain of PEXA.

Simon Evans writes on business specialising in retail, manufacturing, beverages, mining and M&A. He is based in Adelaide. Connect with Simon on Twitter. Email Simon at simon.evans@afr.com