Ferrovial Raises Bid for Australian Detention-Center Operator
06 April 2016 - 12:50PM
Dow Jones News
SYDNEY—Spanish infrastructure group Ferrovial SA increased its
hostile takeover bid for Broadspectrum Ltd., the manager of
Australia's offshore detention centers for asylum seekers, to 769
million Australian dollars (US$580 million), in a final attempt to
get a deal over the line.
Ferrovial said the A$1.50 a share proposal, up from an earlier
bid of A$1.35 share, won't be increased again unless there is a
competing offer from another party.
"We believe the revised offer is compelling for shareholders,"
said Santiago Olivares, Chief Executive of Ferrovial Services. "We
encourage all shareholders to accept this cash offer at a premium
value rather than risk their shares returning to pre-takeover price
levels."
The revised offer is free from conditions other than the
requirement that Ferrovial secures at least 50.01% of stock in the
target. However it again failed to win over Broadspectrum's board,
which urged shareholders in the Sydney-based contractor to reject
the proposal.
"While the increase in the offer is positive for shareholders,
the revised offer continues to undervalue Broadspectrum's shares,"
said Broadspectrum Chairman Diane Smith-Gander. Ms. Smith-Gander
said the board had engaged with Ferrovial's board and management
but had been unable to reach an agreement.
The earlier offer of A$1.35 a share was rejected by
Broadspectrum's board in January and failed to win support of major
shareholders, with Ferrovial gaining only 2.27% of voting power in
the company. Independent adviser Ernst & Young has valued the
shares at A$1.71 to A$1.98. They closed Tuesday at A$1.25.
It is Ferrovial's second swipe at Broadspectrum. Late in 2014 it
offered A$1.95 a share and then A$2.00 for the company, then called
Transfield Services Ltd., only to be rebuffed by the board and
abandon the bid.
Broadspectrum's share price fell by more than half in the 12
months before Ferrovial's December bid, which the board said was
opportunistically timed to take advantage of a short-term slump.
Investors have been worried about one of the company's biggest
moneymakers, its contract to run detention centers on the remote
Pacific islands of Manus in Papua New Guinea, and Nauru, where
Australia runs an offshore visa-processing system for immigrants
trying to enter the country without authorization.
There were also worries about the impact of the resources
slowdown on the company which does maintenance work for mining
companies and builds telecommunications infrastructure, as well as
working for the country's defense department and providing
low-income public housing in Australia.
The detention centers have been under scrutiny for several years
over allegations of abuse and sexual misconduct by staff. In early
2014, Reza Berati, a 23-year-old Iranian asylum seeker, was killed
in rioting at one center. This has made Broadspectrum the subject
of an aggressive divestment campaign. Institutional investors
including industry-pension-funds Hesta and NGS Super have recently
sold their stakes. In August Broadspectrum denied media allegations
that it had been lax in reporting incidents at its detention
centers or had misled a Senate inquiry into the subject.
Broadspectrum was selected last year by the Department of
Defence and Border Protection as the preferred bidder for the
renewal of the contract, but the department now plans to extend the
current agreement by 12 months and renew the tender process for a
new five-year contract.
Analysts have said the contract is likely to be renewed but have
warned that revenue and margins will probably fall with the drop in
the number of asylum seekers reaching Australia. In recent years
the government has adopted tough policies, including turning back
some boats to neighboring Indonesia.
Broadspectrum announced in February that it had more than
tripled its first half profit to A$25 million as it executed a
turnaround program. The company said Wednesday it remains in a
strong position with contracted revenue for fiscal 2017 of A$2.8
billion, and reaffirmed guidance for full-year underlying earnings
of between A$280 million and A$300 million.
Ferrovial extended the deadline for its offer by two weeks until
May 2.
Write to Rebecca Thurlow at rebecca.thurlow@wsj.com
(END) Dow Jones Newswires
April 05, 2016 22:35 ET (02:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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