Ferrovial Bids for Australian Operator of Asylum-Seeker Camps

SYDNEY, Australia—Spanish infrastructure-group Ferrovial SA wants to go where many investors have feared to tread—managing Australia's controversial detention centers for asylum seekers arriving here by boat.

The company on Monday made an offer of 692 million Australian dollars (US$508 million) for Broadspectrum Ltd., which manages the government-owned centers on nearby Pacific islands.

In a sign of its hunger to get the deal done quickly, Ferrovial's bid doesn't require support from Broadspectrum's independent directors.

The asylum centers in question have been under scrutiny for several years amid allegations of abuse and sexual misconduct by staff toward detainees.

In early 2014, Reza Berati, a 23-year-old Iranian asylum seeker, was killed in rioting at one of the centers.

As a result, Broadspectrum has become the subject of an aggressive divestment campaign. Concern over the way the detention centers are run has prompted some institutional investors, including industry-pension-funds Hesta and NGS Super, to sell their stakes recently.

Broadspectrum's shares jumped as much as 54% on Monday when Ferrovial lobbed the A$1.35-a-share bid, which comes amid heightened interest from foreign investors in Australian infrastructure assets from ports and railways to power grids.

"If the offer is successful, it would represent a solid step in Ferrovial's strategy to expand its global footprint and the group's presence in Australia," said Í ñ igo Meirá s, Ferrovial's Chief Executive Officer.

Ferrovial is one of the largest global infrastructure operators, with assets including London's Heathrow Airport and the 407 ETR toll road in Toronto, Canada. In Australia, it provides services such as maintenance and facility management to sectors including mining, transport and government.

It is the Spanish group's second swipe at Broadspectrum, which also builds telecoms infrastructure and does maintenance work for mining companies. Late last year, Ferrovial approached Broadspectrum with a much higher A$1.95 offer that it later raised to A$2.00, valuing the Australian company at more than A$1 billion. The board rebuffed the offer at the time, saying it was too low.

Broadspectrum's shares, which went on to lose almost a quarter of their value, struck an 18-month low of 84 Australian cents last week, as slowing investment in Australia's resources industry continues to hurt its bottom line.

The bulk of Broadspectrum's earnings, however, come from its contract to service detention camps on the Pacific islands of Nauru and Manus, where Australia runs an offshore visa-processing system for immigrants trying to enter the country without authorization, often by boat. Broadspectrum, which recently changed its name from Transfield Services Ltd., is currently negotiating with the government for a renewal of the agreement.

Analysts say the contract is likely to be extended, but have warned that revenue and margins are likely to fall following a drop in the number of asylum seekers due to tougher government policies, including turning back some boats.

This time, Ferrovial is going directly to shareholders with an offer that doesn't require a recommendation from Broadspectrum's board. Management said it would consider the bid, a 59% premium to Broadspectrum's last closing price, but advised shareholders not to take action.

Write to Rebecca Thurlow at [e-mail]

(END) Dow Jones Newswires

December 07, 2015 01:15 ET (06:15 GMT)

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