Spotless rejects $700 million private equity offer as undervalued

The listed services group Spotless has rejected a much-anticipated takeover offer from Pacific Equity Partners, saying the $698 million offer undervalues the company.

Spotless said this morning it had received a non-binding and conditional proposal from PEP to acquire 100% of the company at $2.63 per share, but the offer – its second from a private equity firm this year – did not reflect its fundamental value.

Spotless shares were trading at $2.35 this morning before being placed in a trading halt.

“The Spotless directors have reviewed the proposal in detail and believe that it does not reflect the fundamental value of the company in the context of a change of control,” the statement read. “The directors do not intend to take any further action in relation to the proposal.”

The statement goes on to say the acquisition of the shares is dependent on PEP or a third party proceeding, and noted that PEP is not committed to proceed with any transaction and can choose not to do so if it wishes.

PEP has responded by saying the offer is compelling, and noted that it is well prepared to develop a deal.

“We could move quickly to turn our proposal into a binding offer via scheme of arrangement, capable of delivery in a short period of time,” the private equity firm said.

“We hope to be able to engage with the board on this basis.”

The proposed price also assumes that no dividends will be paid to shareholders prior to completing the deal.

It was reported by Fairfax yesterday that the suitor had spent time speaking with institutional shareholders about the deal and the possibility of winning their support.

The ASX earlier this week questioned Spotless on a rise in its share price. Spotless said at the time it had not received an offer.

The offer for Spotless comes half a year after it rejected a similar offer from another private equity firm, believed to be Blackstone of the US.