Broadspectrum Surges After Board Recommends Ferrovial Offerby and
Company says certainty of offer may now be attractive
Change of stance follows decision to close refugee facility
Broadspectrum Ltd. surged the most in more than four months after the board of the Australian defense and maintenance-services provider changed tack and recommended shareholders accept a A$769 million ($587 million) bid by Spain’s Ferrovial SA.
Broadspectrum said Thursday the certainty of Ferrovial’s offer may now be attractive, after a decision by Papua New Guinea to close a Manus Island refugee processing camp increased uncertainty about its future earnings. Ferrovial earlier this month upped its offer to A$1.50 a share in cash from A$1.35, saying that the bid was final and would close on May 2.
Broadspectrum shares jumped 34 percent to A$1.49 as of 10:31 a.m. in Sydney trading, the most since Dec. 7 and the highest since last June. Shares in Ferrovial fell as much as 2.7 percent in Madrid.
Ferrovial has fought an 18-month battle to gain control of Sydney-based Broadspectrum, which also provides services across industries such as infrastructure and energy. The Spanish company first bid in 2014 and its eventual offer of A$2-a-share was rejected by the board in December of that year.
The Madrid-based company returned with a hostile offer of A$1.35-a-share a year later, which was also rebuffed by Broadspectrum’s board for significantly undervaluing the company. That offer had a minimum acceptance threshold of 50.1 percent.
In changing its recommendation on the Ferrovial bid yesterday, Broadspectrum’s board said the issues around the closure of the Manus Island facility it manages could have a “material” impact on future earnings and would not be resolved by the time the offer expires at 7 p.m. Sydney time on May 2.
Ferrovial welcomed the board’s decision and said in a separate statement it already has acceptances from 31.21 percent of investors.
The Spanish company is deploying spare cash to extend its geographical reach, said Olivia Peters, an analyst at Berenberg in London, who rates Ferrovial buy. Ferrovial bought Amey Plc in 2003 to get into the U.K. market and may be seeking to reprise that strategy with the purchase of Broadspectrum, Peters said by phone.
“They have argued that they want geographical diversification,” she said. “I get what they are trying to do but I wonder whether there are better ways of achieving it.”
Broadspectrum’s biggest investor Allan Gray Australia Pty said yesterday it had accepted Ferrovial’s offer, according to Chief Investment Officer Simon Mawhinney. Allan Gray owns 18.7 percent of the company, according to data compiled by Bloomberg.