Spotless Group Ltd. has rejected a second takeover offer in six months, saying the bid “did not reflect the fundamental value of the company.”
Melbourne-based Spotless, whose plastic coat-hanger division is the company's weakest performer, received an indicative, non-binding and conditional offer from Sydney-based Pacific Equity Partners Pty. Ltd. to acquire 100 percent of its shares for A$2.63 a share.
At press time, Spotless' shares were trading at A$2.42 a share. That values the PEP bid at US$696 million.
Spotless' Braiform division supplies polypropylene garment coat hangers, packaging and hanger reuse programs to 32 countries, including the United States.
In a report to investors at Spotless' annual general meeting Nov. 18, Managing Director Josef Farnik said falling retail volumes and increasing resin and general input costs have affected Braiform's profits.
While all other Spotless operating divisions delivered sales growth in the financial year that ended June 30, Braiform's sales fell 0.8 percent to US$219.3 million. The division's operating profit fell 32.6 percent to US$5 million. Hanger units manufactured dropped 5.8 percent to 2.45 billion.
In an announcement to the Australian Stock Exchange, Spotless said its directors do not intend to take any action on the PEP buyout offer. No executives commented on the bid at the annual meeting.
PEP, a private equity firm that focuses on buyouts and late-stage expansion capital in Australia and New Zealand, said the Spotless board failed to listen to its shareholders and give PEP's proposal due consideration.
PEP said it had entered into pre-bid agreements and share sale agreements with some shareholders, which gave PEP the right to acquire more than 19 percent of the company's shares.
A PEP spokesman said: “We have approached the board with what we and many of Spotless' shareholders acknowledge is a very compelling offer and, given the lack of engagement, are surprised to have already received a rebuttal.
“We could move quickly to turn our proposal into a binding offer, via a scheme of arrangement, capable of delivery in a short period of time. We hope to be able to engage with the board on this basis,” he said.
The offer comes six months after Spotless rejected an offer from another private equity firm to take over the company for A$2.50 a share.
There had been media speculation in Australia about Braiform's possible sale as a separate unit. Spotless had earlier confirmed it had begun a confidential sale process after receiving “unsolicited approaches” for the business.
But in August, Spotless said it had decided to retain the Braiform business and end discussions with potential buyers.
The company's other services include cleaning, security and catering.