Downer Makes A$1.26 Billion Takeover Offer for SpotlessBy
Deal to be funded with A$1.01 billion capital raising
Takeover continues diversification from mining services
Downer EDI Ltd., the Australian engineering and infrastructure management company, offered to buy Spotless Group Holdings Ltd. in a cash deal valuing the company at A$1.26 billion ($974 million) as it continues to diversify from resources following the mining-investment boom.
Downer offered A$1.15 per share for the Melbourne-based cleaning and catering services firm, according to a statement Tuesday, 59 percent more than Monday’s close. The company secured a 19.99 percent stake in Spotless late yesterday in a transaction arranged by UBS Group AG.
The takeover will be funded by a A$1.01 billion capital raising at A$5.95 per share, a 20 percent discount to Monday’s closing price.
Spotless shares surged 46 percent to A$1.06 at 11:39 a.m. in Sydney.
Spotless told shareholders not to take any action on the offer. The company has hired Citigroup Inc. and lawyers Gilbert + Tobin to advise on the deal.
The deal would be the largest for Downer, which has been re-positioning its business as the once-in-a century resources bonanza peters out. Buying Spotless, which grew from one dry-cleaning store in 1946, would give it a business that employs 36,000 staff throughout Australia and New Zealand offering corporate services from facilities management to food and cleaning operations.
Spotless, which was bought by private-equity group Pacific Equity Partners in 2012 and re-listed in 2014, has declined 71 percent from an April 2015 high of A$2.47. Last month, the firm said it would cut dividend payouts and forecast full-year profit that missed analyst estimates as it restructured a portfolio of under-performing contracts.
Downer, which has operations across Australia and New Zealand, the Asia Pacific, South America and Southern Africa, said the deal would continue its “transformation toward a more stable services-focused business with resilient earnings.”
The offer will be subject to conditions including regulatory approval, acceptance from 90 percent of investors and Spotless meeting its earnings guidance.