Shares in mining services group Downer EDI fell hard after a capital raising to help fund the takeover of Spotless fell short.
The shares were down 25% to $5.56 when they came out of a trading halt today.
The two-for-five rights issue priced at $5.95, a discount of 20% to the previous trading price, fell short by about one third.
Only $757 million of $1.01 billion was taken up by institutional investors.
A bookbuild for the remaining entitlements was not taken up institutional shareholders.
The company is now working on the offer to retail shareholders, hoping to raise $254 million.
Downer EDI on Tuesday launched a $1.272 billion takeover of cleaning and catering company Spotless Group at $1.15 a share. Spotless shares are currently trading at $1.05.
The deal would create a company with combined revenues of $10.5 billion, 55,000 employees and a market capitalisation of more than $4 billion.
Today, CEO Grant Fenn told the ASX in an update that arrangements are in place to fully fund the takeover.
“Downer has the team with the right experience and capabilities to manage Spotless,” he says.
“We have generated significant value in Downer over the past few years and we intend do the same with Spotless.”