What happened?
Shares of Dye & Durham (TSX: DND) tanked by about 16% to $17.97 per share last week to post its biggest weekly losses since the first week of May. With this, DND stock underperformed the broader market by a wide margin, as the TSX Composite Index ended the week with a 3.3% decline. The latest round of heavy selling in the stock has extended its year-to-date losses to a massive 60%.
So what?
Last week’s sharp selloff in Dye & Durham stock came after a Bloomberg report claimed that the Canadian software company is considering walking away from the Link Administration Holdings acquisition deal, citing people familiar with the matter. Link Group is a Sydney-based software firm that primarily provides record-keeping technology and information solutions to the superannuation administration industry. The Australian Securities Exchange-listed Link Group currently has a market cap of about AU$2 billion.
Dye & Durham originally announced the agreement to acquire Link Group in December last year in a deal worth $3.2 billion, reflecting a 15% premium over Link’s then share price. However, Link’s shares have seen nearly 17% value erosion since then. Following this, Dye & Durham reduced its proposal from a cash consideration of AU$5.50 per Link’s share to AU$4.30 per share in June.
The Canadian software company expected this acquisition to help it expand its global footprint and customer base in business-to-business software and information service solutions segments. That’s why investors might be reacting negatively to the possibility of it walking away from the deal, triggering a selloff in DND stock.
Now what?
While the speculations about Dye & Durham walking away from the Link Group acquisition deal might keep its stock volatile in the near term, I still find really attractive for long-term investors — especially when it’s down 60% year to date. In its fiscal year 2022 (ended in June), analysts expect its total sales to more than double on a year-over-year basis to around $482 million with the help of consistently growing demand for its cloud-based software solutions. Given that, investors may want to take advantage of the recent selloff in DND stock to buy this amazing growth stock at a big bargain.
