The game of corporate chicken is now underway at Spotless as hold out shareholders who are refusing the $1.15 cash offer from Downer EDI, are told there will be no final dividend.
Downer holds 87.5% of Spotless after a tortuous $1.2 billion takeover bid which began in March. The main hold out is US hedge Coltrane with a 10.6% stake which obviously hopes for some sort of inducement to be taken out.
Spotless revealed on Thursday that it incurred a bottomline loss of $348 million for 2016-17 after big one-off costs of $464 million from restructuring, asset write-downs and impairments along with the extra costs of defending the $1.2 billion takeover, produced the slash of red ink.
Revenues fell 5.3% at $3.01 billion.
Spotless also revealed that its chairman Garry Hounsell, who had led the company’s defence against the Downer offer, would be stepping down next week on August 31.
That will strengthen Downer’s hold on the board and the company. Spotless has four Downer representatives on its board (with two Spotless representatives prior to Mr Hounsell’s departure). Professor John Humphrey will become the new Spotless chairman
The troubled laundries business operated by Spotless, which the company tried to sell last year, suffered a 12.3% drop in profits in 2016-17 which the company blamed on lower yields and margin pressure.
Underlying earnings before interest, tax, depreciation and amortisation from the laundries business fell to $62.6 million from $71.4 million.
Spotless paid a final dividend of five cents a share last year.
Analysts say if Coltrane hangs on it could face the prospect of Spotless being delisted from the ASX in the next 12 months because the volume of shares traded will fall.
If turnover in Spotless shares falls as expected with the free float so small and mostly accounted for by one big holder the ASX could allow Downer to delist Spotless and save $1 million a year in listing fees. That prospect would force Coltrane to sell.