Following months of recommending its shareholders reject the $1.15-a-share bid from Downer, Spotless has reluctantly advised its shareholders to accept the offer.
In a statement issued on Tuesday Spotless directors recommended shareholders accept Downer’s $1.3 billion takeover, announcing the engineering company now holds a 67.279 per cent stake.
“The Spotless directors have carefully considered its previous recommendation to shareholders in the context of the changed circumstances facing Spotless, particularly the change in board composition and the current shareholding that Downer holds in Spotless,” the company said.
“Given this change in circumstances, the Spotless directors believe it is now more difficult to form a view that Spotless will deliver greater value to shareholders over the medium term and, on balance, unanimously recommend that shareholders accept the Downer offer.”
Downer nominates directors to Spotless board
The decision by the directors to recommend shareholders accept the offer came as Downer assumed control of the Spotless board, appointing four directors including its non-executive directors, Philip Garling and Grant Thorne, chief financial officer, Michael Ferguson, and a former Downer non-executive director, John Humphrey.
Downer has nominated four directors to join the Spotless board, being two of its non-executive directors, Philip Garling and Grant Throne, its chief financial officer Michael Ferguson and a former Downer non-executive director, John Humphrey.
Three current non-executive directors of Spotless, Diane Grady, Nick Sherry and Julie Coates, have decided to retire from the Spotless board. Theses changed will be effective from 19 July 2017.
Garry Hounsell will continue as Spotless chairman, while Simon McKeon and Spotless CEO and managing director Martin Sheppard will remain in their roles as directors.
Hounsell welcomed the new appointments to the Spotless board, saying their experience in senior leadership roles across a range of industries would be an asset to Board deliberations.
“The retiring directors have made an important and valued contribution to Spotless, providing leadership through a challenging period for the company,” Hounsell said.
“While it is a period of transition for the company, the Spotless board, management and employees remain focussed on business performance and delivery of Spotless’ service offering to its customers on a business as usual basis.”
Liquidity of Spotless shares likely to be reduced
Now that Downer has obtained effective control of Spotless, the liquidity of Spotless shares is likely to be substantially reduced. As a result, the number of Spotless shares traded on the ASX in the future could decline significantly, thereby potentially lessening the value of the shares held by Spotless shareholders who do not accept the offer.
Downer has stated that it intends to seek to have Spotless removed from the official list of the ASX. If Spotless is de-listed, Spotless shareholders who do not accept the offer will hold shares in an unlisted company for which there may be no liquid market, unless either Downer or Spotless provides an alternative mechanism for shareholders to sell their shares, before or after any de-listing.
Downer has also indicated that if it gains more than 50 per cent but less than 90 per cent of the shares in Spotless, it will review Spotless’ dividend and capital management policies.