Ferrovial tipped to take control of Broadspectrum

Broadspectrum has recommended the $794m offer, with major shareholders Allan Gray and Invesco set to accept.

Spanish giant Ferrovial looks set to gain control of detention centre owner Broadspectrum with over 50 per cent of acceptances likely to fall to Ferrovial in the wake of the troubles at Papua New Guinea’s Manus Island.

Major shareholder Allan Gray which owns over 10 per cent of the company is expected to support the bid tonight and Invesco will follow suit shortly after.

This will give the Spanish company over 50 per cent of the company and success in its second attempt at the services operator in a $794 million bid.

Meanwhile, the board has changed its recommendation to tell shareholders in the wake of the uncertainty they should accept the offer.

“All of the directors currently intend to accept the revised offer in respect of their Broadspectrum holdings,” the group said on Thursday evening.

The Ferrovial offer at $1.50 a share will close on Monday night.

It represents a premium of 43 per cent to Broadspectrum’s closing share price on April 27.

As of Wednesday, Ferrovial’s bid had only 13.79 per cent acceptances, but that had jumped to 23.74 per cent this morning as shareholders showed signs of concern over the Manus Island outlook.

The target group this evening said it was unlikely investors would have clarity on the impact of PNG’s potential closure of its Manus Island detention centre before the takeover deadline expired.

“It is not possible to determine either (1) the nature, scope and timing of any changes, or (2) any resulting impact to Broadspectrum, including whether the changes will be positive, negative or neutral from the company’s perspective,” it said.

The detention centre operator’s Manus Island contract is highly lucrative and investors fear it may be taken away after the PNG Supreme Court labelled the detention centre “unconstitutional and illegal” this week.

Broadspectrum’s underlying earnings before interest, tax, depreciation and amortisation in fiscal 2017 are still expected to exceed $300 million, but it cautioned this figure should not be taken as a formal statement of outlook in light of doubt around the PNG decision.

It has maintained existing underlying earnings guidance for the current year.