Link in a consortium to buy PEXA

Link Administration Holdings has joined with Commonwealth Bank and Morgan Stanley Infrastructure Inc to make an offer to buy PEXA, an online property settlements platform, for around $1.6bn (the price is not yet finalised).

The offer has been accepted by shareholders representing more than 50%, but is subject to a number of further conditions (not least, one imagines, agreement on a price) which are expected to take another two to three months to meet.

If completed, the transaction will see Link's stake in PEXA increase from 19.8% to between 27% and 44%. That means Link will need to pay $115m-387m, which is to be funded with a combination of cash and debt. We'll have a better understanding of Link's final share of PEXA as the sale nears completion.

PEXA is a fast-growing business with appealing traits, though detailed financial data is not available. It potentially has a monopoly market position as the only provider of electronic property lodgments with the majority of Australia's financial institutions as customers.

Link estimates that there are around 1.5m property lodgements annually worth around $240m in revenues. If processing shifts away from paper to digital - which looks likely - PEXA may take a very large share of that revenue. So a purchase price of $1.6bn may well be justified. HOLD.