Spotless has rejected Downer EDI's $1.27 billion takeover bid

Tomohiro Ohsumi/AFP/Getty Images

Downer EDI’s move into cleaning services has been knocked back by takeover target Spotless.

The mining services company’s $1.15 a share offer was rejected today by the Spotless board of directors as not reflecting the true value of the business.

A short time ago, Spotless shares were trading at $1.10, down 0.45% on Friday’s close. Downer shares were steady at $5.62, down just 0.09%.

The Downer bid launched on March 21 valued the cleaning and catering company Spotless at $1.272 billion.

The takeover would create a company with combined revenues of $10.5 billion, 55,000 employees and a market capitalisation of more than $4 billion.

Spotless chairman Garry Hounsel says the board is unwavering in its belief in the fundamental strengths of the business, including a blue-chip customer base and a strong portfolio of long term government, health and defence contracts.

He says Downer’s offer is opportunistic and timed to take advantage of a historical Spotless share price low.

Among shareholders, Coltrane Asset Management with 10.37% of Spotless shares, plans to reject the offer.

Hounsell said: “Your directors have been and continue to focus on exploring all options to maximise value to shareholders — either in its current form as an independent listed entity executing on the strategy reset and returning to growth or exploring options in relation to a superior proposal to the current Downer offer.”

Downer, hit hard by the end of the resources boom, has been repositioning itself from the mining sector to roads and rail, public transport, utilities, communications and defence.

The company in February posted an 8.5% rise in after tax profit to $78.2 million for the half year to December. Total revenue increased 1.7% to $3.6 billion.

Downer is now targeting net profit of around $175 million for the 2017 financial year, up from $163 million previously.

Spotless posted a $358 million half year loss, including write-downs of $391 million associated with restructuring.

Full year profit is forecast to be between $80 million and $90 million.

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