Spotless says the arduous process of dealing with a hostile takeover bid was a major factor behind the company accepting a $720 million offer from private equity firm Pacific Equity Partners (PEP).
Cleaner and facilities management firm Spotless on Monday agreed to a full takeover by PEP for a total cash consideration of $2.71 per share – after six months of haggling.
Spotless shareholders will receive $2.62 in cash per share and a special dividend of four cents per share.
The total consideration also includes the interim dividend of five cents per share paid by Spotless to shareholders on April 12.
PEP initially offered $2.63 for each Spotless share, later sweetening the offer to $2.68.
The Spotless board had wanted $2.80 per share, saying that would compensate shareholders for the company’s significant investment for its medium- and long-term benefit.
Spotless chairman Peter Smedley said on Monday that it was pleasing that the protracted takeover issue was now resolved.
“The PEP proposal provides the most certain near-term return for all Spotless shareholders,” Mr Smedley told reporters.
He said that Spotless board’s valuation of $2.80 per share had been established as a result of management presentations in December 2011.
“PEP’s initial proposal was presented to Spotless on November 16, 2011, and since then the business has experienced significant disruption, uncertainty and material costs,” Mr Smedley said.
“That’s been exacerbated in recent months.”
It was feared that shareholder value could fall if the matter dragged on.
Mr Smedley likened the process of going through the due diligence process with PEP to “having 400 of your in-laws in the living room when you’re trying to put the baby to bed”.
The longer the process went on, the more expensive it became to defend the company’s position.
The Spotless board also had agreed to the PEP offer because there were no proposals from any other party.
In addition, investors holding the majority of Spotless shares had indicated that they were willing to sell, even when the PEP offer was back at $2.63.
“We believe that that $2.71, plus franking credits for those that are able to use them, has given all shareholders the opportunity of achieving what they aimed to achieve out of this and take cash certainty now,” Mr Smedley said.
He said the outcome of $2.71 per share looked good when one considered that US private equity firm Blackstone had offered $2.50 per share for Spotless in May 2011.
Mr Smedley said the advisers to PEP were the same ones that advised Blackstone.
“So this bid actually started with the same jockeys in May of last year,” he said.
“They changed horses in October and ran with the bid again.”
The bids had risen from Blackstone’s $2.50 to PEP’s $2.71, which, when franking credits were included, represented a substantial improvement of nearly 22 cents.
Spotless shares were 10 cents higher at $2.56 at 1343 AEST on Monday.
