Downer Makes A$1.26 Billion Takeover Offer for Spotless

  • 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.

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE