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Ferrovial & Broadspectrum: Rearranging Mattresses

This week has been a busy one for Broadspectrum Ltd and Ferrovial SA. 

  • On February 8th, Broadspectrum lodged a Supplementary Target Statement.
    • Broadspectrum raised its FY2016 EBITDA forecast range yet again to A$280-300mm and introduced a FY2017 EBITDA "not a forecast" but A$300mm+ estimate. 
    • Broadspectrum announced its Department of Immigration and Border Protection (DIBP) contract for running the Nauru and Manus Island detention centres had been extended for 12 months, but that the next 5-year contract would be put into competition (i.e. Broadspectrum lost its "preferred tenderer status"). This extension has raised contracted revenue for FY2017 by some 20% from where it was at end-December 2015 and gives hints to what the contract is worth. 
    • Despite the increase in contracted revenue and the EBITDA upgrade, the Independent Expert has revised its fair value range of Broadspectrum shares DOWNWARD from a previous A$1.71-1.98/share to A$1.60-1.85/share, but still says "not fair and not reasonable". 
  • The next day, FERROVIAL extended its Offer by two weeks from 22 Feb 2016 to 7 March 2016 but at the same time opened the door to walk away.

After the Broadspectrum announcement on February 8th, the shares jumped from the A$1.18-1.20 range to A$1.25-1.26 for a day. After the Ferrovial announcement the next day, BRS shares fell 13% to A$1.09. 

Broadspectrum and Ferrovial continue to square off, with Ferrovial "considering its options" - i.e. opening the door to walk away - and Broadspectrum standing fast on its recommendation to Reject and major Broadspectrum shareholder (18.7%) Allan Gray potentially triggering a Truth in Takeovers Act issue with its public response Monday.

More discussion below the fold...


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This post first appeared on Smartkarma | Intelligent Investing, please read the originial post: here

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Ferrovial & Broadspectrum: Rearranging Mattresses


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