Spanish giant Ferrovial bids for Australia’s Broadspectrum

The company’s shares have lost half their value over the past year as several large pension funds have sold out of Broadspectrum under pressure from policyholders uncomfortable with its biggest-earning business.

“Ferrovial’s investors should be very concerned about the legal, financial and reputational risks that come with participation in the serious and systemic human rights abuses taking place in Australia’s offshore detention centres”, said Rachel Ball, director of advocacy at Australia’s Human Rights Law Centre.

Ferrovial’s latest A$1.35 per share offer is well short of the $1 billion it offered a year ago in a proposal that Broadspectrum rejected as too low.

The company said it had delivered on upgraded earnings guidance in fiscal 2015, had secured preferred positions on key contracts worth more than $2 billion, and strengthened its balanced sheet.

Broadspectrum urged shareholders not to take any action until it could provide a formal recommendation expected within 15 days.

It employs more than 25,000 people and has contracts to run Australia’s offshore detention centres on Papua New Guinea’s Manus Island and on Nauru in the Pacific.

It also pointed out that its shares had traded above $1.60 as recently as June and that Ferrovial has not had access to “confidential company information” since December 2014.

Ferrovial was quick to point out the weaknesses and uncertainties faced by Broadspectrum over coming years but said it is making the offer based on its long-term strategic initiatives and eagerness to build its presence in Australia.

The offer price represents a 59% premium on Friday’s closing price of 85c. However this morning, they were down seven cents, or 5.58 per cent, to $1.185 at 8.25am.

The contractor’s shares dropped 5¢ in early trading on Tuesday to trade at $1.20.

Broadspectrum has suggested that Spanish infrastructure giant Ferrovial has undervalued the detention centre operator with its $715 million takeover bid.

The Spanish bid comes amid consolidation in the operations and maintenance sector, including Programmed’s takeover of Skilled Group this year.