Spotless Group's directors have backflipped and recommended shareholders accept a $1.3 billion takeover bid from engineering company Downer EDI.
The Spotless board had until Monday recommended shareholders reject the offer but on Tuesday said they had changed their minds, “reluctantly” recommending shareholders accept the offer.
“We continue to believe in the strong underlying fundamentals of the Spotless business, however now that Downer owns 67.279 per cent of Spotless and will control a majority of the Board from Wednesday, on balance, we reluctantly recommend that shareholders accept the Downer Offer,” Spotless chairman Garry Hounsell said in a statement.
The directors said they had changed their position because the Downer directors who will control the Spotless board from Wednesday cannot be relied upon to advance the company’s strategy to boost earnings growth.
“This reconstituted Board may not undertake the strategy reset in the manner which the current Board was confident would drive both strong earnings and cash-flow growth over the medium term,” the statement said.
Downer has nominated four directors to join the Spotless board: two of its non-executive directors, Philip Garling and Grant Thorne, its chief financial officer Michael Ferguson and former Downer non-executive director, John Humphrey.
Three current non-executive Spotless directors of Spotless – Diane Grady, Nick Sherry and Julie Coates – will retire and Mr Hounsell will continue as chairman, while Simon McKeon and Spotless chief executive and managing director Martin Sheppard will remain as directors.
Downer notified the ASX that it passed the 67 per cent mark on Monday, after launching its hostile takeover bid in March.
It is offering $1.15 for each Spotless share, valuing the facilities management firm at $1.3 billion.
Last month the Spotless board said the company had positive momentum, having reduced its operational complexity by selling a bundle of about 250 small cleaning contracts in New Zealand, and had started delivering services under a major contract at the new Royal Adelaide Hospital.