Downer EDI is making another attempt to get rid of its unwanted laundries business bought in the takeover of Spotless.
A month ago Downer ended the sale process when the mooted buyer, Southern Pacific Laundry (owned by private equity group, Anchorage Capital Partners) withdrew in the face of concerns about the deal from the key regulator, the ACCC.
The reason for the ACCC’s resistance was the fact that both Spotless and South Pacific were the major players in the Australian laundries business.
The ACCC said Spotless Laundries and SPL were two of the largest commercial laundry suppliers nationally and in Adelaide, Perth, Sydney and Melbourne.
Yesterday, Downer had entered into an agreement to sell 70% of its Laundries business to an entity established by Australian private equity firm, Adamantem Capital (Adamantem).
Under the agreement, Downer will sell the controlling interest in the Laundries business and receive total proceeds of approximately $155 million on a cash and debt free basis.
Following the transaction, Downer will cease to consolidate the Laundries business and will recognise its residual 30% ownership interest as an Equity Accounted Investment.
The Chief Executive Officer of Downer, Grant Fenn said in the statement that the transaction represented a significant step in Downer’s Urban Services strategy.
“The sale of 70% of Laundries achieves the objective of removing one of the most capital-intensive businesses from the Downer balance sheet,” Mr Fenn said. “Laundries continues to perform well as it recovers from the COVID-19 lockdowns in New Zealand and Victoria and by retaining a 30% interest we will participate in this ongoing recovery.
“We look forward to working closely with Adamantem and its management team providing market-leading services for our customers and employment opportunities for our people.”
Adamantem Capital Managing Director, Chris Adams, said: “Adamantem is proud to be investing in the leading commercial laundry business in Australia and New Zealand.
“We intend to invest to grow the business for the benefit of the 1,900 loyal employees and numerous longstanding customers. We look forward to partnering closely with Downer and the management team and to take advantage of the exciting opportunities that lie ahead.”
The sale is subject to regulatory and some customer approvals, and is expected to complete by the end of March next year.
Downer shares edged up 0.9% to $5.33.