FRRVY Ferrovial SA (PK)

SYDNEY—Spanish infrastructure group Ferrovial SA increased its hostile takeover bid for Broadspectrum Ltd., the manager of Australia's offshore detention centers for asylum seekers, to 769 million Australian dollars (US$580 million), in a final attempt to get a deal over the line.

Ferrovial said the A$1.50 a share proposal, up from an earlier bid of A$1.35 share, won't be increased again unless there is a competing offer from another party.

"We believe the revised offer is compelling for shareholders," said Santiago Olivares, Chief Executive of Ferrovial Services. "We encourage all shareholders to accept this cash offer at a premium value rather than risk their shares returning to pre-takeover price levels."

The revised offer is free from conditions other than the requirement that Ferrovial secures at least 50.01% of stock in the target. However it again failed to win over Broadspectrum's board, which urged shareholders in the Sydney-based contractor to reject the proposal.

"While the increase in the offer is positive for shareholders, the revised offer continues to undervalue Broadspectrum's shares," said Broadspectrum Chairman Diane Smith-Gander. Ms. Smith-Gander said the board had engaged with Ferrovial's board and management but had been unable to reach an agreement.

The earlier offer of A$1.35 a share was rejected by Broadspectrum's board in January and failed to win support of major shareholders, with Ferrovial gaining only 2.27% of voting power in the company. Independent adviser Ernst & Young has valued the shares at A$1.71 to A$1.98. They closed Tuesday at A$1.25.

It is Ferrovial's second swipe at Broadspectrum. Late in 2014 it offered A$1.95 a share and then A$2.00 for the company, then called Transfield Services Ltd., only to be rebuffed by the board and abandon the bid.

Broadspectrum's share price fell by more than half in the 12 months before Ferrovial's December bid, which the board said was opportunistically timed to take advantage of a short-term slump. Investors have been worried about one of the company's biggest moneymakers, its contract to run detention centers on the remote Pacific islands of Manus in Papua New Guinea, and Nauru, where Australia runs an offshore visa-processing system for immigrants trying to enter the country without authorization.

There were also worries about the impact of the resources slowdown on the company which does maintenance work for mining companies and builds telecommunications infrastructure, as well as working for the country's defense department and providing low-income public housing in Australia.

The detention centers have been under scrutiny for several years over allegations of abuse and sexual misconduct by staff. In early 2014, Reza Berati, a 23-year-old Iranian asylum seeker, was killed in rioting at one center. This has made Broadspectrum the subject of an aggressive divestment campaign. Institutional investors including industry-pension-funds Hesta and NGS Super have recently sold their stakes. In August Broadspectrum denied media allegations that it had been lax in reporting incidents at its detention centers or had misled a Senate inquiry into the subject.

Broadspectrum was selected last year by the Department of Defence and Border Protection as the preferred bidder for the renewal of the contract, but the department now plans to extend the current agreement by 12 months and renew the tender process for a new five-year contract.

Analysts have said the contract is likely to be renewed but have warned that revenue and margins will probably fall with the drop in the number of asylum seekers reaching Australia. In recent years the government has adopted tough policies, including turning back some boats to neighboring Indonesia.

Broadspectrum announced in February that it had more than tripled its first half profit to A$25 million as it executed a turnaround program. The company said Wednesday it remains in a strong position with contracted revenue for fiscal 2017 of A$2.8 billion, and reaffirmed guidance for full-year underlying earnings of between A$280 million and A$300 million.

Ferrovial extended the deadline for its offer by two weeks until May 2.

Write to Rebecca Thurlow at rebecca.thurlow@wsj.com

(END) Dow Jones Newswires

April 05, 2016 22:35 ET (02:35 GMT)

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