Downer EDI has launched a $A1.26 billion takeover bid for ASX-listed outsourced laundry and cleaning services firm Spotless Group as the Australian-based infrastructure and mining firm looks to expand its operations as a vertically integrated services provider.
Sydney-based Downer is offering $A1.15 a share to Spotless shareholders, a 59% premium to the 72.5Ac price the stock traded at before the announcement. Downer bought a 15% stake at an average price of $A1.146 yesterday, adding to its near-5% holding. Spotless shares have since jumped 46% to $A1.06.
Spotless returned to the public markets in 2014 in an initial public offering valuing the firm at $A1.2 billion, just two years after private equity firm Pacific Equity Partners took it private for $A723 million. The outsourcing firm has been languishing on the ASX after lowering its dividend payout ratio in the face of reduced earnings.
Downer said it sees an opportunity to broaden its services and open new income streams to create the largest diversified and integrated services manager in Australia and New Zealand with annual revenue of $A10.5 billion.
"It is aligned with our strategy and strengthens Downer's position as a leading integrated services provider to not only the resources, transport and utilities sectors, but also in health, education, corrections, defence and other areas of government," Downer chief executive Grant Fenn said in a statement. "Importantly, the Downer management team has what it takes to turn the Spotless business around and to create a highly competitive, customer-focused and successful service organisation."
Downer is raising $A1.01 billion in an underwritten rights issue at $A5.95 a share, a discount to yesterday's closing price of $A7.42, to help fund the acquisition, with the balance from existing debt facilities.
When PEP took Spotless private in 2012 it paid $A2.71 a share, valuing the company at $A723 million, ending 11 months of takeover talk swirling around the firm. Last month a class suit was filed against Spotless over the representation of its 2015 accounts.
This month Downer agreed to buy New Zealand construction firm Hawkins from the McConnell family, giving the firm exposure to building construction on top of its traditional civil building work in roads and drainage infrastructure.
Spotless advised shareholders to wait until they get a formal recommendation before accepting the offer, and chairman Garry Hounsell said the board "continues to believe in the fundamental strengths of our business."
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