MELBOURNE, Australia—Papua New Guinea’s ordered closure of a detention center holding around 850 people seeking asylum in Australia has breathed fresh life into a hostile takeover bid for the facility’s operator.
Spanish infrastructure company Ferrovial SA ’s increased cash bid earlier this month for Broadspectrum Ltd., valuing it at 769 million Australian dollars (US$584 million), had struggled to gain traction. Major shareholders in the detention-facilities operator backed the board’s view that the revised bid, up from a December offer of A$692 million, was still too low.
On Thursday, Broadspectrum reversed its stance on the deal and recommended shareholders accept the offer. All the directors plan to accept, it said.
Ferrovial earlier in the day said acceptances for the offer had jumped to 23.7% of Broadspectrum’s shares, after slipping to 13.8% as of Wednesday before Papua New Guinea’s government said the center must close in the wake of the country’s Supreme Court ruling that hundreds of asylum seekers were being held there illegally.
Broadspectrum runs Australia’s offshore asylum-seeker detention centers on the remote Pacific islands of Manus, in Papua New Guinea, and Nauru. The contracts are key money-makers for Broadspectrum, and their most recent renewal in February prompted management to upgrade its earnings outlook.
Human-rights groups have criticized conditions in the centers, and lawyers for some of the detained asylum seekers say some people have been held for nearly three years. Broadspectrum in August denied media allegations it had been lax in reporting incidents at detention centers, and early this year said it was confident it had done a competent job.
Ferrovial’s offer, due to close after the market shuts Monday, needs at least 50.1% of Broadspectrum shares to succeed. A spokesman for Ferrovial in Australia declined to comment on the offer or the company’s intentions.
In a statement after the local market closed, Broadspectrum said Papua New Guinea’s decision raised uncertainties that wouldn’t be resolved before Monday’s deadline for Ferrovial’s bid.
“The opportunity for Broadspectrum shareholders to receive the certainty of A$1.50 per share in cash in the face of these uncertainties may be attractive,” it said, adding the offer represented a 43% premium to the last closing price for the shares and 76% to the price just ahead of the earlier December bid.
Investment firm Allan Gray, Broadspectrum’s largest shareholder with an 18.7% stake, had backed the company’s rejection of the bid. Chief investment officer Simon Mawhinney earlier Thursday said his firm was gathering as much information as possible to make a decision before the expiration of the offer on Monday.
“Broadspectrum is in a position where they can accept the cash offer, as it can’t be revoked even though the contract is likely to be lost,” said Matthew Felsman, a private wealth adviser at APP Securities, which doesn’t own shares in the Australian company.
Ferrovial earlier in the month increased its takeover bid from A$1.35 but said that this was its final offer. The company had flagged the uncertainty in Broadspectrum’s contract with Australia’s Department of Defense and Border Protection, noting in offer documents that almost all of the Australian company’s earnings stem from a division that relies largely on income coming from the contract for the detention centers.
Australia’s immigration minister, Peter Dutton, said Wednesday that the court ruling in Papua New Guinea wouldn’t change Canberra’s immigration policy. Under tough laws first put in place in 2001, successive governments have required asylum seekers intercepted en route to Australia to be sent to offshore detention centers, which critics have labeled Australia’s Guantanamo Bay.
Australia in February extended its contract with Broadspectrum by 12 months to March 2017 as it sought to put the contract back to tender. The company had been selected in August as the preferred bidder for the renewal of the contract.
On Wednesday, Broadspectrum, which also builds telecom infrastructure and low-income public housing in Australia, said there could be a shortfall in expected earnings due to headwinds in the infrastructure industry, although that was expected to be offset by other parts of its business. It affirmed earnings guidance for the financial year. It also confirmed plans to buy back up to 10% of its shares over the next 12 months if Ferrovial’s bid fails.
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