Spotless Group’s shares fell by more than 11 per cent on 17 August 2016, following the contracting company’s announcement that it would not proceed with the potential sale of its laundries business.
‘The company had previously announced it would consider the sale of the division in a bid to increase shareholder value. The sale was expected to raise between $400 million to $500 million’.
Spotless’ management has determined that “the best value for its shareholders will be achieved by retaining the laundries business within Spotless’ integrated services portfolio”.
According to an article published in The Australian Financial Review on 17 August 2016, ‘fund managers will be re-assessing their thoughts on the business’.
The paper also observed that the ‘laundries’ heavy depreciation charge sunk the sale’, as ‘the unit’s machines require ongoing maintenance capital expenditure, while the actual towels and linen stock typically needs to be replaced every three years according to Spotless’ prospectus’.