Industrial services company Spotless Group says a $698 million takeover offer from a private equity firm undervalues the company.
Spotless received an indicative, non-binding and conditional proposal to buy all of its shares from Pacific Equity Partners (PEP) on Wednesday.
PEP offered an indicative price of $2.63 per Spotless share, valuing the company at $698.15 million.
Spotless shares last traded at $2.35 before confirmation of the offer was given to the market, giving the company a market capitalisation of $623.8 million.
The shares added four cents, or 1.7 per cent, to close at $2.39 on Thursday.
“The Spotless directors have reviewed the proposal in detail and believe that it does not reflect the fundamental value of the company in the context of a change of control,” Spotless said in a statement.
“The directors do not intend to take any further action in relation to the proposal.”
Shareholders will get their chance to question the board’s appraisal at the Spotless annual general meeting in Melbourne on Friday.
PEP said it was disappointed with the response from the Spotless board and felt the board had failed to listen to shareholders.
“We have approached the Spotless board with what we and many of Spotless shareholders acknowledge is a very compelling offer and, given the lack of engagement, are surprised to have already received a rebuttal from the board,” a PEP spokesperson said.
“We are well prepared and willing to develop a compelling offer to shareholders and, with a reasonable level of engagement, we could move quickly to turn our proposal into a binding offer.”
PEP has told Spotless it has entered into pre-bid agreements and share sale agreements with Spotless shareholders including the Blythe family, McMullin family, Investors Mutual, Lazard Asset Management and Orbis Investment Management.
Those shareholders together held over a quarter of Spotless shares.
Spotless said those agreements did not inhibit its ability to secure a higher takeover proposal.
Spotless offers outsourcing of facility management, maintenance, cleaning, laundry, food and retail services.
