Spotless Group spikes after A$1.2bn bid from Downer EDI

Shares in Spotless Group have surged by a half after mining services company Downer EDI launched a A$1.2bn ($974bn) takeover offer for the cleaning services group.

Downer today revealed its intention to make a full takeover for its rival, having scooped up a 19.9 per cent stake in a raid after the Australian stock market closed on Monday. It is offering A$1.15 cash per Spotless share for those it does not already own.

The offer price represented a 59 per cent premium to Spotless’ closing price on Monday. Shares were up 45.2 per cent in lunchtime trade in Sydney, making it the best performer in the S&P/ASX 200, but gained as much as 51.7 per cent earlier today to A$1.10.

Spotless said in a statement to the ASX that its board would evaluate the offer and provide a recommendation in due course.

Grant Fenn, Downer’s chief executive, said in a statement to the Exchange:

The acquisition of Spotless is a significant investment in Downer’s strategy to expand its capabilities and strengthen its position as a leading provider of services to customers in Australia and New Zealand.

It would represent the biggest acquisition to date for Downer, which has been attempting to diversify away from mining services in recent years. Buoyed by a number of contract wins and a profit upgrade at its February results, the company’s share price hit a record high A$7.62 last week.

Spotless, though, has been having a tougher time. The company’s interim results at the end of February revealed A$423m of writedowns as well as plans to exit from smaller contracts that make up nearly a third of its business. These were received poorly by the market, sending its share price to a record low on Friday.