Well I may be exaggerating a bit on the 70%, but SPO shareholders have a few things in their favour:
-The bid from downer has been resisted by SPO from day one, with SPO claiming it is opportunistic and trying to take them to the takeover review panel. It's management has been in the media talking down the bid and claiming it not to be fair value for existing holders- this might just be gamesmanship except for a few factors-
-There have already had interest in parts of their business in the recent past, the laundries unit has been valued between 400-600m on its own, this may or may not be disposed of by any acquirer
- The SPO management have repeatedly made statements in the media (some of which may have been leaked deliberately) that a rival bidder exists and is considering making an offer. Now suppose this is not the case, and SPO are playing a dud hand and bluffing. How long do you think those in the industry, and downer management to find out that a rival bid doesn't exist case? Perhaps some of the so-called rival bidders put out a statement to their own concerned shareholders that no such intention to buy SPO exists? Where does that leave SPO management when negotiating with the $1.15 downer bid and having previously told shareholders that they are been bought out to cheap? SPO management will look completely incompetent and be on the back foot with any further negotiations with downer, and lost a huge amount of credibility when they advise their own shareholders on the offer. I don't think such a high stakes bet would be worth the risk for SPO. Perhaps some will say that shareholders will take the offer regardless of what SPO management recommend. But do we really have that information for sure, ie the VWAP for each shareholder and their voting intentions, and what about the 10.4% stake that Coltrane Asset holds? Surely they will wait it out for the highest bidder, and since downer's offer has a 90% minimum acceptance clause they are in a strong position to do so.
- Spotless is cheap compared to international peers, trading on a lower much lower multiple. See previous posts in recent threads which compare the likes of potential bidders such as Compass, Sodexo and ISS. These guys have deep pockets and would have greater synergies than downer. Some of them have been quite open about intending to make acquisitions recently.
All in all it may not be a 70-30 bet but I'll be very surprised if a rival bid does not come through in the next couple of weeks, and if SPO are to believed that 1.15 is undervalued then maybe we can expect at least 1.25?
SPO Price at posting:
$1.11 Sentiment: Buy Disclosure: Held
