Detention centre operator Broadspectrum (formerly Transfield Services), looks set to escape a $1.50 a share cash takeover offer from its Spanish suitor Ferrovial in the wake of the rapid moves to close the Manus Island detention centre in PNG (which is one of Broadspectrum’s largest contracts).
Ferrovial’s bid, which expires on Monday, will probably lapse as it is unlikely to reach the needed 50% acceptance threshold after reports shareholders have started withdrawing their shares from the acceptance facility in the wake of the PNG decision on Tuesday finding the people in the Manus Island camp had been detained illegally and in breach of the PNG constitution.
The court ordered Australia and PNG to stop detaining the 800-900 asylum seekers “forthwith”, although Australian Immigration Minister Peter Dutton insists none will be brought to Australia.
Last yesterday afternoon, the PNG Government surprised with an announcement that the centre would close and the government would now hold talks with the Australian government on a timetable for closure.
This means the Australian government of Prime Minister Malcolm Turnbull will have to find alternate detention facilities, possibly during the election campaign.
The day’s news and the court decision further undermined Broadspectrum’s share price. which fell 5.8% to $1.05.
It also undermined the thrust of the third target supplementary statement from Broadspectrum yesterday afternoon where it played up operational improvements, earnings and new business, and merely restated an early comment on the Manus Island situation.
Broadspectrum said it had secured $100 million in energy sector work for Woodside and Shell, reaffirmed guidance of Underlying FY2016 EBITDA of between $280 million and $300 million, reported a “Strong performance based on significant contribution from Defence, Social and Property sector and ongoing improvement in the Americas”.
But directors said the "turnaround in Infrastructure sector has been delayed.”
The company also said its 2017 financial year outlook "remains positive with Underlying EBITDA expected to be in excess of $300 million”, and it confirmed the "ability and intention to commence share buy-back of up to 10 per cent of the Company’s shares on-market over the next 12 months in the event that Ferrovial’s Takeover Offer unsuccessfully lapses on 2 May 2016.”
On Manus Island, the company said “Broadspectrum notes the ruling of Papua New Guinea’s Supreme Court relating to the Regional Processing Centre at Manus Province. The Company is awaiting further guidance from the centre operator, PNG Immigration and Citizenship Service and Broadspectrum’s client, the Department of Immigration and Border Protection. Broadspectrum will update the market on any impact the decision might have on the Company as soon as this becomes known.” That is now out of date.
Broadspectrum shareholders have started withdrawing their shares form the bid’s acceptance facility. Ferrovial said acceptances had dropped to 13.79% on Wednesday from 16.14% on Tuesday.
If the bid fails to get to 50.1% acceptances by close of business on Monday night, Ferrovial has said it will have failed and the shares will be returned and no cash will be paid out.
But you would have thought Ferrovial will be knocked down in the rush of shareholders accepting the $1.50 offer, especially after the uncertainty about Manus Island the hundreds of millions of dollars of revenue Broadspectrum would have received (and whatever profits it will earn).
It could be shareholders are taking back their shares and selling because they think Ferrovial may use the Manus Island decision and looming closure to abandon the bid before it ends on Monday.
