Woodford Investment Management  

Link takeover collapses over unmet conditions

Link takeover collapses over unmet conditions
 

A potential takeover of Link Group has collapsed, after the Financial Conduct Authority warned that one of the group’s subsidiaries may be liable for a £50mn fine over its management of the Woodford Equity Income Fund.

In a statement to the Australia stock exchange on Friday (September 23), Link said certain conditions of the takeover had not been met, leading to a court to dismiss the proceedings to approve the scheme.

Link said it was “disappointed” at the outcome.

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“Despite Link Group working diligently over an extended period and using its best efforts, the proposed scheme with Dye & Durham…which Link Group shareholders approved in August will not be proceeding," it said.

The FCA had warned Dye & Durham that its approval of the takeover was conditional on D&D’s ability to make up any shortfall in Link Group’s ability to pay any redress imposed.

The regulator has issued a draft warning notice fining Link Fund Solutions, a subsidiary of Link, £50mn following an investigation into its handling of the Woodford fund. 

This is on top of the £306mn in redress it previously said Link would be liable for.

Link Fund Solutions can either agree to resolve the case, or it can challenge the findings at the Regulatory Decisions Committee, and ultimately the Upper Tribunal, which is the FCA's standard process.

Link Group said Link Fund Solutions would explore all options available in response to the draft warning notice, including engaging with the FCA over a settlement, as well as challenging any warning notice.

It also said that any fine would be paid by Link Fund Solutions, and not by the parent group.

The company has also said it does not agree with the regulator’s view that the company should be fined.

An FCA spokesperson said: “We can’t comment on the specifics of the proposed acquisition of Link Group. We will continue to progress our enforcement work in relation to this matter.”

Fund collapse

As the authorised corporate director of Woodford Investment Management, Link has been under investigation by the FCA since the collapse of the Woodford Equity Income Fund.

The fund, once worth £10bn, began struggling with a wave of redemption requests in 2019.

After a scramble to sell shares to improve the fund’s liquidity, Link announced in October of that year that the fund would be wound down and Neil Woodford fired. 

Thousands of investors saw their money trapped in the suspended fund and lose considerable sums as a result.

At the point of its suspension, the fund was £3.5bn in size - though it had shrunk to £2.9bn by the time capital started being repaid.

Regulator pressure

The regulator has come under pressure, most recently from MPs, over the speed of the investigation.

In May last year, chief executive of the FCA, Nikhil Rathi, told the Treasury committee the investigation would be completed by the end of 2021 but was unlikely to be published that year.