Broadspectrum Limited (ASX:BRS) reported to the ASX that it recommends its shareholders to reject the takeover bid by the Spanish infrastructure group, Ferrovial Services Pty Ltd as the management finds the bid undervaluing the company’s shares.
The logistics and consulting firm which was formerly called Transfield Services, lodged its Targets Statement today. The company stated that its management unanimously voted against Ferrovial’s offer worth $715 million as they find it significantly undervalued Broadspectrum’s shares.
The valuation provided by Ernst & Young Transaction Advisory Services Limited, which was hired by Broadspectrum, concluded that the offer was not fair and reasonable. While Ferrovial offered $1.35 per share, EY’s report estimated Boradspectrum’s shares between $1.71 and $1.98, which confirmed that the offer represented a 27% discount to the mid-point of the valuation range.
Broadspectrum’s Managing Director and CEO, Mr. Graeme Hunt provided some insight on the takeover proposal: “We are stronger now than we were in December 2014 when Ferrovial was prepared to pay $2.00 per share. Our work in hand now exceeds $10 billion (vs. $8.7 billion when Ferrovial made its $2.00 per share offer), and we have over $12 billion in contracted, shortlisted and preferred revenue (vs $10.4 billion). We have further strengthened our balance sheet and reduced net debt to $459 million at 31 December 2015, continuing a strong downward trajectory in net debt.”
Broadspectrum upgraded its earnings guidance for FY2016 as it anticipates Underlying EBITDA to be between $265 million to $285 million, and added that its outlook for FY2017 is positive.
Mr. Hunt also said that the company is well placed to benefit from significant opportunities as it sees a potential for further outsourcing from governments along with growth in the telecommunication sector in Australia and New Zealand. Broadspectrum also aims to increase its activity in the US refining and petrochemical sector.
The company noted that the offer is opportunistic and seeks to take advantage of the recent weakness in Broadspectrum’s share price and the recent performance of its business. Looking at the share price performance in a big picture, BRS followed a strong uptrend for seven years since its IPO in 2001, reaching its peak at $10.36 in 2007. However, the stock plunged 85% during the GFC, and has not been able to recover. BRS last traded at $1.21 as at 10:56 AM (AEDT), losing 3.2% today on the opening.
Author: Imran Valibhoy
Jan 21, 2016
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.