27/03/2008 - 14:45

Spotless bids $556m for Programmed Maintenance

27/03/2008 - 14:45

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Property and maintenance services company Spotless Group Ltd has made a hostile $556 million bid for Programmed Maintenance Services Ltd, one year after PMS bought Perth-based Integrated Group Ltd.

Property and maintenance services company Spotless Group Ltd has made a hostile $556 million bid for Programmed Maintenance Services Ltd, one year after PMS bought Perth-based Integrated Group Ltd.

The offer has come four months after PMS appointed Perth-based Intergrated Group Ltd's chief executive Chris Sutherland as managing director, following a company merger in June 2007.

Mr Sutherland commenced his role as managing director of PMS on January 21, 2008 and is based in Perth.

Spotless informed Programmed's board only this morning of its intention to gain control of all the shares in Programmed that it does not already own.

Spotless said it holds 13.2 per cent of Programmed shares, including a 10.3 per cent interest through pre-bid acceptance agreements with three of Programmed's largest institutional shareholders.

Programmed largest institutional shareholders are Commonwealth Bank, Invesco Australia Ltd, Perpetual Ltd and Westpac Banking Corp.

Programmed shareholders have three options to accept the scrip and cash offer, representing a value of $6.11 for each Programmed share.

Programmed shareholders could receive 1.620 Spotless shares per Programmed share, or $1.50 cash plus 1.223 Spotless shares per Programmed share, or $3.00 cash plus 0.825 Spotless shares per Programmed share.

The bid values 100 per cent of Programmed at around $556 million and implies an enterprise value of $760 million.

If the takeover succeeds, it would essentially double the market capitalisation of Spotless to $1.25 billion.

"The offer is compelling for Programmed shareholders, providing a highly attractive premium for their shares and the opportunity to participate in a significantly larger and more diverse Australasian facility services business," Spotless chairman Peter Smedley said.

Spotless, which has many business interests from cleaning and catering services to building management and supply of coat hangers, is offering a 34.6 per cent premium to Programmed's closing price of $4.54 yesterday.

Spotless deputy managing director Jo Farnik said a hostile takeover for Programmed was "the most appropriate path" to put forward an attractive offer.

He said he expected the merger would provide significant strategic and financial benefits to both firm's shareholders. It would create a leading provider of facility services in Australia and New Zealand with an improved long-term growth profile.

Mr Farnik said he expected about $18 million in synergistic benefits in the second full year of ownership.

There are a number of conditions on offer, including a 90 per cent minimum acceptance that analysts say will be hard to reach without a the recommendation of the Programmed board.

Programmed's board, which is meeting today to consider the proposal, has advised its shareholders to not take any action.

Shaw Stockbroking head of research Brent Mitchell said the $6.11 offer is an attractive price, with about a 60 to 70 per cent chance of succeeding.

"(But) a board recommendation would be necessary," he said.

Mr Mitchell noted that Programmed shareholders might be wary since Spotless had "not done a very good job" managing the group over the past few years.

Spotless posted a 59.9 per cent drop in 2008 first half net profit to $13 million.

However, Spotless said in February that it remained on track to improve its financial performance during 2008.

Mr Mitchell said today's takeover announcement would take Spotless into new territory by entering into distinct labour hire and marine services, where the company had little experience.

Investors dumped Spotless shares to their lowest close since May 2003, ending 31 cents or 8.59 per cent down, at $3.30.

Programmed shares surged 15.64 per cent, ending up 71 cents at $5.25.

Spotless has committed debt facilities from Goldman Sachs, JBWere Pty Ltd and Goldman Sachs Credit Partners LP.

The takeover is expected to be funded through drawdowns on existing Spotless debt facilities, establishing new bank debt facilities and Spotless scrip issued to Programmed shareholders under the offer.

Spotless said it expected to lodge a bidder's statement by April 2 and was looking forward to hearing from Programmed's board.


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