Ferrovial launches $517m takeover bid for Australian firm

This is the second time the Spanish developer comes knocking on Broadspectrum's door in 12 months as it seeks a greater footprint Down Under.

Spanish developer Ferrovial is offering to buy Australian group Broadspectrum, previously known as Transfield Services, for A$715 million (€476 million; $517 million) in cash. 

At A$1.35 per share, Ferrovial's bid represents a 59 percent premium to Broadspectrum's closing price prior to the announcement date. 

With more than 25,000 employees, Broadspectrum is an infrastructure services firm operating in countries including Australia, the US, Canada and Chile. It is active across the mining, telecommunications and infrastructure maintenance sectors. 

In a statement, the company told investors to take ‘no action’ whilst its board assesses the bid, though it is expected to recommend against the offer. 

African fund manager Allan Gray, which owns an 18.7 percent stake in Broadspectrum, said the offer is an opportunistic bid that values the business too low. 

The board of Broadspectrum will provide a formal recommendation on the offer in the Target Statement, which will be released within 15 days of the Bidder’s Statement being sent to shareholders. 

The Bidder’s Statement is expected to be sent between 21 December 2015 and 4 January 2016. 

“The company is well placed to benefit from significant opportunities ahead including further outsourcing of government services and the expected improvement in business activity from other key markets in 2017,” said Broadspectrum in the statement. 

Ferrovial’s offer will be subject to a final 50.01 percent minimum acceptance, foreign investment approval by Australian authorities and other conditions. It does not need approval from Braodspectrum’s board to proceed, however. 

“Our offer provides Broadspectrum shareholders the certainty of cash consideration, eliminating the risks associated with the near-term outlook in Broadspectrum shares,” said Santiago Olivares, chief executive officer of Ferrovial Services.

Should the bid be successful, Ferrovial will fund 100 percent of the transaction via a combination of cash reserves of €2,498 million and undrawn debt facilities, which stood at €1,248 million as at 30 September 2015.

This is the second offer for Broadspectrum submitted by Ferrovial in 12 months. In December 2014, Ferrovial offered A$2 per share, valuing the company at A$1 billion. Broadspectrum, named Transfield at the time, rejected the offer.