Spotless Group has gone a bit coy on its half a billion dollar takeover offer for Programmed Maintenance Services after seeing Programmed’s Target statement this week.
Spotless yesterday warned that it could let the offer lapse if Programmed’s audited full year earnings match the figure indicated in Programmed’s target’s statement.
In Programmed’s target’s statement, released Wednesday, the company indicated that earnings before interest (EBIT) for the full year to March 31, 2008, were forecast to be $53.5 million on an unaudited basis.
Programmed also forecast a net profit of $27.1 million for fiscal 2008.
But yesterday Spotless told the ASX that it "notes that its offer includes a condition that the consolidated EBIT of Programmed for the year ended 31 March 2008 is not less than $56 million, which was at the low end of broker forecasts before the offer was announced."
"If Programmed’s actual audited results for the year ended 31 March 2008 are consistent with the unaudited forecast results, Spotless would be entitled to allow the offer to lapse.
"Spotless is disappointed with Programmed’s unaudited EBIT forecast for the year ended 31 March 2008 of $53.5 million, which is approximately 10 per cent below the median of broker forecasts of $59.6 million before the offer was announced."
Spotless also said that Programmed had elected not to provide shareholders with an independent expert’s report on the value of the Programmed business.
"Furthermore, Programmed has not adequately highlighted the risk that the Programmed share price is likely to fall in the absence of the Spotless offer," Spotless said.
Spotless said it still believed that Programmed had a strong strategic fit with Spotless and that the combination of the businesses would benefit shareholders of both companies.
"Spotless continues to view the offer as compelling for Programmed shareholders, particularly in the absence of an alternative offer and its soft 2008 forecast," Spotless said.
Programmed said in its Target statement that it expects solid earnings growth for fiscal 2008 and 2009 as it builds a market in the resources sector following the acquisition of a new business.
Programmed forecast earnings per share before amortisation for fiscal 2009 to rise 15 per cent to 40 cents, after a 9% lift to 34.9 cents in the 2008 year, which ended on March 31.
The company said its outlook was supported by the planned, successful acquisition of Western Australian engineering maintenance company SWG Holdings for $40 million and the sale of two non-core businesses for $29 million.
Spotless has three alternatives for PRG shareholders to consider :
- All Share Alternative: 1.620 Spotless shares per Programmed share; (worth $5.57 yesterday at a Spotless close of $3.42. PRG closed at $4.99) or
- Majority Share Alternative : $1.50 in cash plus 1.223 Spotless shares per Programmed share (worth $5.68 yesterday); or
- Maximum Cash Alternative: $3.00 in cash plus 0.825 Spotless shares per Programmed share ($worth $5.82 yesterday).
"Under each of these alternatives, the Offer represents value of $6.11 for each Programmed share, valuing Programmed’s equity at approximately $556 million and implies an enterprise value of approximately $760 million," Spotless said in its March 28 announcement.
Spotless made its unsolicited approach to Programmed in late March.
Programmed said in its statement on Wednesday that some shareholders – including all the directors, who hold about 3% of Programmed stock – controlling about 16% of the stock had indicated on a non-binding basis that they would not accept the offer in its current terms.
The Spotless offer is conditional upon a minimum acceptance of 90%.
Programmed shares were sold down to $4.80 yesterday after the Spotless reply, but later edged higher to be off 6 cents on the day. Spotless shares rose 7 cent to $4.42 with most of that coming right at the end.
Spotless said it "continues to believe that Programmed has a strong strategic fit with Spotless and that the combination of the businesses will create value for shareholders of both companies. Spotless continues to view the offer as compelling for Programmed shareholders particularly in the absence of an alternative offer and its soft 2008 forecast."
