PEP-owned Spotless raises $919m in Australia IPO

The stock subsequently fell back slightly and was trading around the A$1.71 mark as of Friday mid-afternoon, which gives the company a market capitalization of around A$1.89 billion.

Spotless sold 540.5 million shares - comprising 404.5 million new shares and 136 million existing shares - at A$1.60 apiece, the bottom end of the indicative range. A further 81.1 million shares, constituting the overallotment option, were sold at the same price. The overallotment option will be used to stabilize the shares and ensure they don't fall below the IPO price for at least 30 days.

PEP agreed to take Spotless private in April 2012 after a protracted pursuit, which saw a majority of shareholders favor the deal while the board resisted it. The private equity firm paid A$720 million for all outstanding shares, with the enterprise valuation reaching A$1.1 billion.

PEP held a 72.5% stake in the business through its fourth fund, with co-investors holding another 20.6%. The rest of the company was owned by management and other existing shareholders. Prior to the overallotment option being exercised, PEP and its co-investors sold 132.3 shares between them, generating proceeds of A$211.7 million. The fund and co-investors continue to own 35.4% and 10.1% of the business, respectively.

PEP is already thought to have returned cash to LPs from the investment following a dividend recap in 2013.

The offering values Spotless at 7.9x pro forma forecast EBITDA for the 2015 financial year. The company is expected to report pro forma EBITDA of A$301.4 million for that period, up from A$248.8 million in 2014. EBITDA reached A$166.2 million in 2013, up from A$146.2 million in 2011, the year before PEP bought the company.

Net profit has risen from A$39.4 million to A$47.7 million over the same period and is forecast to reach A$103.4 million in 2014.

Explaining the steps taken post-privatization, Spotless previously cited the reorganization of customer relationship management to focus on customer sectors rather than service lines; a reduction in overheads, improvements in productivity, and the exit of loss-making and marginal contracts to boost earnings and margins; and the identification of new potential contract opportunities.

It also divested non-core divisions including Brailform and International Services.

Founded in 1946, Spotless now employs nearly 33,000 people across Australia and New Zealand, servicing more than 1,750 contracts covering facilities management, food and cleaning. Projects range from facilities maintenance for the New Zealand Department of Corrections to running non-match-day functions at the Melbourne Cricket Ground.

Last year, the company served food to 76 million customers, catered to approximately 11 million sports fans at stadia and major events, maintained more than 80,000 homes in public housing estates, laundered 36 million sheets, and delivered 3.5 million hours of service to over 200 healthcare providers.

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• Topics
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