BROADSPECTRUM LTD This is an IMPORTANT document and requires your immediate attention
TARGET'S STATEMENT
This Target's Statement has been issued in response to the off-market conditional takeover bid made by Ferrovial Services Australia Pty Ltd ACN 609 542 556 (an indirectly wholly owned subsidiary of Ferrovial, S.A.) for all the ordinary shares in Broadspectrum Limited.
YOUR BROADSPECTRUM DIRECTORS UNANIMOUSLY
RECOMMEND THAT YOU
REJECTTHE OFFER
FERROVIAL'S CONDITIONAL OFFER
significantly undervalues your sharesTO REJECT FERROVIAL'S CONDITIONAL OFFER
DO NOTHINGIf you are in any doubt about how to deal with this document, you should seek independent financial, legal, taxation or other professional advice before making a decision as to whether or not to accept the Offer.
Financial Advisor Legal Advisor
Nature of this document
This document is a Target's Statement issued by Broadspectrum Limited ABN 69 000 484 417 (Broadspectrum) under Part 6.5 Division 3 of the Corporations Act in response to the off-market conditional takeover bid made by Ferrovial Services Australia Pty Limited (ACN 609 542 556) (Bidder), an indirectly wholly owned subsidiary of Ferrovial, S.A (Ferrovial), for all the ordinary shares in Broadspectrum.
A copy of this Target's Statement was lodged with ASIC and given to ASX on 21 January 2016. None of ASIC, ASX or any of their respective officers takes any responsibility for the content of this Target's Statement.
Key dates
Date of the Offer 6 January 2016 Date of this Target's Statement 21 January 2016
looking statements. You should be aware that such statements are only predictions and are subject to inherent risks and uncertainties.
Those risks and uncertainties include factors and risks specific to the industry in which Broadspectrum operates as well as general economic conditions, prevailing exchange rates and interest rates and conditions in the financial markets. Any such statements are also affected
by a range of variables which include but are not limited to price fluctuations, currency fluctuations, actual demand, operating results, governmental and regulatory factors, and economic, financial and political conditions in various countries. Actual events or results may differ materially from the events or results expressed or implied in any forward looking statement. None of Broadspectrum, Broadspectrum's officers and employees, any persons named in this Target's Statement with their consent or any persons involved in the preparation of this Target's Statement makes any representation or warranty (express or implied) as to the accuracy or likelihood of fulfilment of any forward looking statement, or any events or results expressed or implied in any forward looking statement, except to the extent required by law.
Close of the Offer Period (unless
7.00pm (Sydney time) on
You are cautioned not to place undue reliance on any forward looking
extended or withdrawn) 8 February 2016
Broadspectrum Shareholder information line
Broadspectrum has established a Broadspectrum Shareholder information line which Broadspectrum Shareholders may call if they have any queries in relation to the Offer. The telephone number for the Broadspectrum Shareholder information line is 1300 361 735 (for calls made from within Australia) or +61 1300 361 735 (for calls made from outside Australia) Monday to Friday between 8.30am and 5.30pm
(Sydney time). Calls to the Broadspectrum Shareholder information line may be recorded.
Further information relating to the Offer can be obtained from the Bidder's Statement.
Defined terms and abbreviations
A number of terms and abbreviations used in this Target's Statement have defined meanings. These terms and abbreviations are capitalised and have the meanings given to them in section 10 of this Target's Statement. In addition, unless the contrary intention appears or the context requires otherwise, words and phrases used in this Target's Statement that are defined in the Corporations Act have the same meaning and interpretation as in the Corporations Act.
Effect of rounding
A number of figures, amounts, percentages, prices, estimates, calculations of value and fractions in this Target's Statement are subject to the effect of rounding. Accordingly, actual numbers may differ from those set out in this Target's Statement.
No account of personal circumstances
This Target's Statement, and the recommendations contained in it, should not be taken as, and do not constitute, personal advice as they do not take into account your individual objectives, financial situation or particular needs. As such, your Directors encourage you to seek any independent financial, legal, taxation or other professional advice that you require before making a decision as to whether or not to accept the Offer.
Disclaimer as to forward looking statements
Some of the statements appearing in this Target's Statement (including in the Independent Expert's Report) may be in the nature of forward looking statements. All forward looking statements in this Target's Statement reflect views only as at the date of this Target's Statement, and generally may be identified by the use of forward looking
words such as "believe", "aim", "expect", "anticipate", "intending", "foreseeing", "likely", "should", "planned", "may", "estimate", "potential", or other similar words. Similarly, statements that describe the objectives, plans, goals or expectations of Broadspectrum or any other member of the Broadspectrum Group may be forward
statement.
Disclaimer as to information
The information contained in this Target's Statement on Bidder, Ferrovial, the Ferrovial Group and the securities of Bidder or Ferrovial has been prepared by Broadspectrum using publicly available information. The information in the Target's Statement concerning Bidder, Ferrovial and the Ferrovial Group and their assets and liabilities, financial position and performance, profits and losses and prospects, has not been independently verified by Broadspectrum. Accordingly, Broadspectrum does not, subject to the Corporations Act, make any representation or warranty, express or implied, as to the accuracy or completeness of such information.
Foreign jurisdictions
The release, publication or distribution of this Target's Statement in jurisdictions other than Australia may be restricted by law or regulation in such other jurisdictions and persons who come into possession of it should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable laws or regulations. This Target's Statement has been prepared in accordance with Australian law and the information contained in
this Target's Statement may not be the same as that which would have been disclosed if this Target's Statement had been prepared in accordance with the laws and regulations outside Australia.
Diagrams and charts
Any diagrams, charts, maps, graphs and tables appearing in this Target's Statement are illustrative only and may not be drawn to scale. Unless stated otherwise, all data contained in diagrams, charts, maps, graphs and tables is based on information available at the date of this Target's Statement.
Privacy
Broadspectrum has collected your information from the Broadspectrum register of securityholders for the purposes of providing you with
this Target's Statement. The type of information Broadspectrum has collected about you includes your name, contact details and information on your securityholdings in Broadspectrum in accordance with the Broadspectrum Privacy Policy (available at
www.broadspectrum.com). Without this information, Broadspectrum would be hindered in its ability to issue this Target's Statement. The Corporations Act requires the name and address of securityholders to be held in a public register. Your information may be disclosed on a confidential basis to Broadspectrum's Related Bodies Corporate and
external service providers (such as the share registry of Broadspectrum and print and mail service providers) and may be required to be disclosed to regulators such as ASIC. If you would like details of information about you held by Broadspectrum, please contact the Broadspectrum Shareholder information line.
Broadspectrum Target's Statement
Important notices and key dates IFC
Chairman's letter 2
Broadspectrum Directors' recommendation 7
Why you should REJECT the Offer 9
Overview of Broadspectrum and operational update 33
Frequently asked questions 42
Overview of Ferrovial and its intentions 46
Important matters for Broadspectrum Shareholders to consider 48
Key features of the Offer 52
Information relating to your Directors 56
Additional information 58
Glossary and interpretation 61
Authorisation 64
Appendix 1. Independent Expert's Report 65
Appendix 2. Tax Adviser's Report 149
Appendix 3. Average broker forecasts 153
Appendix 4. Broadspectrum historical financials 156
Appendix 5. ASIC instrument 159
Appendix 6. Corporate Directory 161
Contents of this Target's Statement | 1
21 January 2016
Dear Broadspectrum Shareholder
REJECT THE OFFER - DO NOTHING AND TAKE NO ACTIONYou have recently received a Bidder's Statement from Ferrovial outlining a highly conditional offer to acquire your Broadspectrum Shares for $1.35 per share (the Offer). This Target's Statement sets out Broadspectrum's formal response to the Offer.
Our turnaround journey is progressing well and our strategy has sustained a three year positive trend across key financial metrics, while providing for further strong growth. Since FY2013 Broadspectrum has increased revenue and Underlying EBITDA, improved Underlying EBITDA margin, ROCE and underlying cash conversion, and reduced net debt and our total funding requirement.
Your Board has carefully considered the Offer to assess whether it is in the interests of Broadspectrum Shareholders and your Directors unanimously recommend that you REJECT THE OFFER.
Each of your Directors who own or control Broadspectrum Shares intends to reject the Offer in respect of all the Broadspectrum Shares they own or control.
THE OFFER SIGNIFICANTLY UNDERVALUES YOUR BROADSPECTRUM SHARESYour Broadspectrum Shares are worth a lot more than Ferrovial is offering. This is the unanimous view of your Directors and is supported by the Independent Expert who has concluded that the Offer is NOT FAIR AND NOT REASONABLE.
Your Directors commissioned Ernst & Young Transaction Advisory Services Limited (Independent Expert) to prepare an Independent Expert's Report in response to the Offer (attached in full in appendix 1 to this Target's Statement). The Independent Expert has assessed the value of Broadspectrum to be in the range of $1.71 to $1.98 per Broadspectrum Share. The Offer represents a 27% discount to the mid-point of this valuation range ($1.845 per Broadspectrum Share).
The valuation metrics implied by the Offer also represent a significant discount to those of other similar transactions, as well as against Broadspectrum's longer term share price, as summarised below1:
Broadspectrum's longer term share price: Broadspectrum Shares have traded above the Offer Price for extended periods in the last 12 months and as recently as 22 July 2015 prior to the announcement of the Offer. The Offer represents a 16% discount to Broadspectrum's closing share price on 5 June 2015 ($1.60), being the last trading day prior to six months before the announcement of the Offer
Comparable transaction multiples: the EV implied by the Offer represents a 6.9x2 multiple of Broadspectrum's FY2015 Underlying EBIT, which is substantially less than the average multiple of Underlying EBIT of comparable transactions which resulted in a change in control in both Australia (9.9x) and overseas (15.2x)3, and
Broadspectrum's average trading multiple: the EV implied by the Offer represents a 6.5x4 multiple of Broadspectrum's FY2016 Underlying EBIT, which is also a discount to Broadspectrum's average trading multiple across both FY2014 (9.0x) and FY2015 (8.0x)5, noting of course that trading multiples do not include a premium for control.
Please see sections 2.1 and 2.2 of this Target's Statement for further discussion on these valuation metrics.
EV/EBIT multiple implied by the EV of the Offer (itself calculated based on the equity value implied by the Offer Price and Broadspectrum's last stated Net Debt position) and Broadspectrum's FY2015 Underlying EBIT.
Refer to section 2.1 of this Target's Statement for further discussion of comparable transaction multiples.
FY2016 EV/EBIT multiple implied by the EV of the Offer (itself calculated based on the equity value implied by the Offer Price and Broadspectrum's last stated Net Debt position) and the mid-point of Broadspectrum's FY2016 Underlying EBITDA guidance of $265 million to $285 million less the average broker forecast FY2016 depreciation and amortisation for Broadspectrum ($98 million). A summary of the selection criteria, number of broker forecasts comprising the average, range and date of the broker forecasts is provided in appendix 3 to this Target's Statement. The Directors do not adopt the average broker forecast of Broadspectrum's depreciation and amortisation. The broker forecasts have been included solely as an indication of market views.
Refer to section 2.1 of this Target's Statement for further discussion of trading multiples.
2 | Broadspectrum Target's Statement
Transfield Services Limited issued this content on 2016-01-21 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 2016-01-20 21:58:01 UTC
Original Document: http://tse.live.irmau.com/IRM/PDF/2016/TargetsStatement
