Investors are again being asked to put their faith in the Spotless brand.
Spotless, the service company which covered the gamut of catering to cleaning, coat hangers for the ragtrade, cleaning and maintenance, was taken private by buyout group Pacific Equity Partners (PEP) in 2012 at a cost of $A1.3 billion.
At the time it was something of an underperformer, with weak earnings and revenue growth against prospects which were said to have been promising for the outsourcing sector.
Now PEP is flipping Spotless back to life as a public company on the ASX, and will make a very nice profit, raising the question of what will be in it for investors taking up shares in the IPO.
PEP is offering a 51% stake in Spotless to brokers, institutional investors and employees for up to $1.85 each.
Spotless is offering 540.5 million new and existing shares at A$1.60 to A$1.85 each.
It aims to list on the ASX by the end of next month and will be the biggest IPO for some time (certainly bigger than the $450 million Japara Healthcare issue earlier this month), although it is not a new company that will be floating, but an old stager returning to the lists, hopefully cleansed of its previous ability to underperform.
Spotless was bought by private equity firm Pacific Equity Partners in 2012, and has been restructured to focus on servicing the health, education, government, leisure, laundry and linen industries.
The coat hanger business was separated early on because of its difficult financial picture.
PEP say the funds raised will be used to to repay debt and allow existing shareholders (PEP) to realise part of their investment.
PEP will keep the 49% stake after the float, but that stake will overhang the market and put a lid on the share price after the listing.
Spotless operates in 30 countries and turns over $2.8 billion annually. The group used to employ more than 40,000 staff in 2012 when it was taken private. That figure is now around 33,000 according to yesterday’s statement.
Spotless Chairman is Margaret Jackson, the former chair of Qantas. She said yesterday that Spotless has the exited old loss-making and marginal contracts and was now focused on higher margin contracts (as are all companies, especially in the service sector).
Jackson also said the catering, cleaning and laundry group was benefiting from a trend towards outsourcing, which is hardly a new turn in business.
Spotless and others in the sector, such as another serial underperformer in Transfield Services, have been exploiting the outsourcing trend for years.
Transfield has performed indifferently here and in the US, and has lost money and been forced to write down the value of contracts and acquisitions.
"The business has identified potential new contract opportunities representing approximately A$1.5 billion in annual revenue coming to market by the end of full year 2015, with further significant new opportunities in adjacent services and sectors," Ms Jackson said in yesterday’s statement.
Brokers said the book-build for the float is scheduled to happen on May 20 and 21, which will help set the price for the float.
The final price is due to be announced on May 22 with the listing scheduled for May 28.
