Spotless has recommended its shareholders reject a $1.26 billion takeover offer made for the company by engineering group, Downer EDI.
The board of Spotless believes Downer’s $1.15 per share offer is opportunistic and timed to take advantage of a historical low in the catering and contracting company’s share price.
Downer’s offer represented a 59 per cent premium to Spotless’ closing price on the ASX on the day prior to the March 21 bid. A takeover of Spotless would enable Downer to extend its capabilities beyond engineering and construction.
Spotless provides services to a variety of industries, including mining and oil and gas, where it delivers facility maintenance, catering, waste management, cleaning, security and more.
According to Spotless, the offer also did not consider that it had only recently implemented a strategy reset, which was showing early signs of success and demonstrating growth potential.
It added the bid did not reflect the company’s strong core business, and that it was hostile, highly conditional and was not certain to proceed.
Spotless chairman Garry Hounsell said the company’s board was unwavering in its belief in the fundamental strengths of the business.
“These include a blue-chip customer base and a strong portfolio of long term government, health, defence and PPP contracts,” Hounsell said.
“We have assessed the Downer offer in the context of our announced strategy reset, which is expected to be a material driver of growth and is already delivering results, including increasing win rates, and a substantially increased pipeline of quality opportunities.”
Downer plans to fund the takeover through a $1.011 billion equity raising and debt facilities. The offer requires at least 90 per cent shareholder support and regulatory approval to proceed.