Spotless Group has begun testing the market for a sale of its laundries unit following its affirmation of ‘year-to-June earnings guidance in the wake of a sell-off in its shares last week’, reported The Sydney Morning Herald on 30 May 2016.
Analysts have forecasted that the sale could raise more than $650 million and, in the process, ‘halve the size of the Melbourne-based services outsourcing company while providing firepower to strengthen the group’s presence in the facilities management sector’.
Spotless has said that earnings are “unlikely to differ materially from its previous earnings guidance” for the year to June.
Spotless’s laundries unit generates roughly 10 per cent of group revenues, but it has ‘the fattest margins of any of the group businesses, at around 28 per cent’.
“This is a high margin, high volume game, so a roll-up strategy can be effective,” one analyst said. “There had been an issue integrating assets and shifts across those businesses.”
‘It is believed Spotless has received approaches from both trade and private equity buyers that prompted it to formally seek offers for the unit that earns a gross profit, as measured by earnings before interest, tax and depreciation, of around $90 million annually,’ noted The Sydney Morning Herald.
This is not the first time the company has indicated a plan to sell its laundries unit. ‘Prior to its re-float back onto the Australian share market in 2014 at $1.85 a share, the group indicated it may sell its laundries unit, which was later reversed’.