Pacific Equity looks over Spotless books

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MELBOURNE, AUSTRALIA (Feb. 15, 2:10 p.m. ET) — Takeover target Spotless Group Ltd. has agreed to show its financial books to potential purchaser Pacific Equity Partners Pty. Ltd. after “carefully considering” shareholder views, but is not backing down from its pricing demands.

Last month negotiations between Melbourne-based Spotless and Sydney-based private equity firm Pacific Equity Partners (PEP) reached a stalemate after Spotless refused PEP access to its books because they could not agree on due diligence terms.

Spotless is a conglomerate with varied divisions, including cleaning, security, catering and a plastics division, Braiform.

Braiform supplies polypropylene garment hangers, packaging and hanger re-use programs to customers in 32 countries. It reported sales of US$219.3 million for the year ended June 30.

Spotless demanded PEP meet five criteria, including increasing its offer price to at least A$2.80 a share, before any sale can proceed. That values Spotless at US$764 million. But PEP is standing by its offer of A$2.63 per share, which values the company at about US$717 million.

In an announcement to the Australian Stock Exchange, Spotless said it still wants no less than $2.80 a share, but will open its books after “carefully considering” shareholders’ views.

Plastics News previously reported two Spotless shareholders, Sydney-based Investors Mutual Ltd. (IML) and Sydney-based Orbis Australia, were unhappy about how the board handled negotiations. IML Senior Portfolio Manager Simon Conn was reported in Australian media as saying it would push for a Spotless board change if it had to. Orbis Senior Portfolio Manager Simon Mawhinney was reported as saying Spotless’s initial refusal to give PEP’s board an opportunity to conduct due diligence was “unacceptable.”

In a statement, the Spotless board said “uncertainty and operational risk” caused by a prolonged argument could potentially damage Spotless’s business and long-term shareholder value.

“Recognizing this potential damage, Spotless directors have concluded it is in the best interests of all shareholders to minimize the period of disruption and offer PEP access to non-exclusive due diligence.”

PEP’s access is subject to a confidentiality agreement and includes various terms. Plastics News understands PEP has received no time limit in which to make a decision, but will probably decide by mid-March.