PEP finally seals $752m Spotless buyout
Australian cleaning and catering contractor Spotless Group has accepted an A$720 million ($752 million) buyout offer from Pacific Equity Partners (PEP). The total consideration of A$2.71 per share is higher than the private equity firm’s original bid of A$2.68 but still below alternatives suggested last week.
According to a regulatory filing, the Spotless board has reached an agreement with PEP subsidiary Pacific Industrial Services BidCo which will see stockholders receive A$2.62 per share in cash and a special dividend of A$0.04. They will also get to keep a A$0.05 interim dividend paid on April 12.
The board said its decision was based on a number of key considerations: disruption to the business since PEP made its initial bid in November 2011; the lack of alternative bids from other parties; PEP's offer representing the most certain near-term return for shareholders; and a majority of Spotless shareholders supporting an offer at or above A$2.68 per share.
In a separate statement, Rob Koczkar, a partner at PEP, said the bid represents "certainty of cash at a compelling price."
The board originally said it wouldn't entertain any offers that valued the business below A$2.80 per share but, under pressure from shareholders, it allowed PEP to conduct due diligence in February.
The private equity firm's bid of A$2.68 per share valued Spotless at 16.5x projected EBITDA for 2012. When the company suspended trading last week in anticipation of an announcement, it was suggested that PEP would increase its offer to A$745 million - or A$2.80 per share - by including an additional cash return following the divestment of certain non-core assets. These were expected to include underperforming coat hanger business Braiform.
Spotless, which was founded in 1946, operates a facilities management, food and cleaning business that spans more than 30 countries.
PEP is currently investing out of its fourth buyout fund and an associated supplementary fund, which together closed at A$4 billion in March 2008. Prior to Spotless, the firm's most recent investment was the acquisition of a 50% stake in Svenska Cellulosa Aktiebolaget's (SCA) Australasian arm for around $468 million.
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