Private equity said to be ‘in the mix’ for Downer’s Spotless Laundries business

The challenge facing Spotless, of which Downer is a majority owner, has been that many of the major events at stadiums have been cancelled, and Spotless provides services such as catering, cleaning and management for such facilities.

Downer is believed to be in exclusive talks to sell the Spotless Laundries business, with a party – thought to be a private equity firm – closing in.

Earlier, the competition had narrowed to Anchorage Capital Partners, Adamantem Capital and global competitor Alsco.

However, Anchorage Capital Partners is understood to be now out of the contest, and sources say that it is believed a private equity group remains in final exclusive talks.

This would suggest that Adamantem Capital is nearing a deal to buy the operation.

In its presentation for the Macquarie Australia Conference, Downer had said that the sales process for the business was progressing, while the sale of its mining services division through Macquarie Capital remained on hold.

It is understood that price expectations for the mining services division were between $500m and $600m, and while Perenti was a suitor, it is thought that the listed rival was unprepared to meet its price expectations.

At the beginning of the coronavirus crisis in March, it was thought that Downer would discount the sale price of the laundries operation to achieve a sale.

However, the thinking now is that the listed company could achieve a price in line with earlier expectations as Australia makes its way back to work after flattening the coronavirus curve.

Downer forged ahead with the auction with help from adviser VCA Partners as it stared down its debt pile of $1.4bn plus $683.5m of the debt from Spotless, which Downer is a majority shareholder.

However, in April the group announced it refinanced $500m of debt, offering an additional $300m of funds available.

The company has $1.14bn of undrawn facilities and $515m cash and its market value is $2.43bn.

The challenge facing Spotless, of which Downer is a majority owner, has been that many of the major events at stadiums have been cancelled, and Spotless provides services such as catering, cleaning and management for such facilities.

For 2018 to 2019, the laundries business generated $60.4m in earnings before interest, tax, depreciation and amortisation, equating to a price of about $250m.