Downer EDI has extended its $1.26 billion takeover bid for cleaning and catering company Spotless by two weeks, to June 14. The infrastructure and mining services company did not provide any reason for the extension in its statement to the ASX yesterday, but reiterated that the offer was final and urged Spotless shareholders to accept it.
The Financial Review (http://www.afr.com/street-talk/clock-ticks-on-downer-edis-tussle-for-spotless-20170520-gw9j3q) gave a clue as to why the extension might be needed in a report yesterday morning.
"Investors can expect several key developments on Downer EDI’s $1.2 billion tilt for facility services group Spotless this week. "Street Talk understands the Takeovers Panel is leaning towards conducting formal proceedings on the transaction following an application made by Downer early this month.
"The Downer camp wants final orders for Spotless to provide a supplementary target’s statement remedying what it claims are deficiencies in the current version. If the panel conducts proceedings it will weigh the arguments of both sides, while also taking into account a panel guidance note on board recommendations and undervalue statements.
"Downer in its submission claimed the Spotless target statement contained deficiencies, including the basis for the board’s recommendation to reject the offer, statements relating to Spotless’s 2016-17 and 2017-18 guidance and Coltrane Asset Management’s interest in Spotless and the lack of detail regarding the outcome of Spotless’s "strategy reset".
“Spotless did not commission an independent expert’s report on Downer’s offer before rejecting it, which is highly unusual in ASX takeovers." Earlier this month, the Spotless board rejected Downer’s $1.15 per share offer, saying it did not represent adequate value for shareholders. But there was no real analysis or explanation as to why.
Downer holds just 21% of its target, inclusive of an equity swap on. It started the bid by buying a 19.9% stake as well as raising $1.1 billion in an issue to shareholders that left underwriters holding a substantial shortfall from big and small shareholders.
Downer shares rose 0.3% to $6.24, Spotless shares were unchanged on $1.11 against the offer price of $1.15 cash.
