Industrial services company Spotless Group (SPT) said it plans to make a $556 million off-market takeover offer for Programmed Maintenance Service (PRG), increasing the share price of its target by as much as 15%.
Long term value, but short term headwinds. That’s how Deutsche Bank analysts summarise the position of Spotless Group at present. For investors, this is not good news for the short term with the analysts revisiting their model and cutting forecasts to 7% below consensus for FY12. It goes without saying they believe other analysts elsewhere will be forced to conduct a similar exercise.
Citi says Spotless Group’s 11% jump in earnings to $105.1 million is in line with guidance and forecasts of $96.3 million, as is net profit after tax of $53.5 million. It believes the write-offs mark the end of charges and has upgraded its FY09 earnings forecast 16%. It maintains its Hold rating for now and $3.60 target price. Sector: Commercial Services and Supplies.
While the broker sees some strategic rationale behind the company’s bid for Programmed Maintenance Services ((PRG)) it is not so positive on the timing given the earnings issues Spotless faces and the pressure the deal may put on the group’s balance sheet.