Downer increases its stake in Spotless
Currently, Downer owns 40.44% of Spotless and emerged as the largest shareholder in the company. Downer assumes that its offer represents compelling and certain value to Spotless including a 59% premium to $0.725, the last closing price of Spotless shares on 20 March 2017, prior to the announcement of the Offer. Further, it was a 45% premium to $0.791, the VWAP of Spotless shares for the period from 28 February 2017 (when Spotless announced a material profit downgrade) to 20 March 2017. The company asserted that its Offer Price of $1.15 is final and will not be increased in the absence of a superior proposal, while Spotless has confirmed that there are no superior proposals to the Offer. Notably, Downer considers Spotless’ own guidance for FY17 and FY18 NPAT is materially below the NPAT achieved in FY16 and even if these highly caveated figures are met, the business will be performing at levels that are 31-39% lower in FY17 and 24-35% lower in FY18 compared to FY16. Moreover, Spotless remains highly geared and its own target debt levels do not result in a meaningful reduction in its net leverage ratio. As at 31 December 2016, Spotless’ net leverage ratio was 2.7×6, with Spotless stating a target net leverage ratio of 2.5x by June 2018.
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