Law firm Slater & Gordon Limited (ASX: SGH) has launched a class action against Spotless Group Holdings Ltd (ASX: SPO) as Downer EDI Limited (ASX: DOW) presses ahead with its takeover offer.
Class Action
In a media release by Slater & Gordon on Thursday, the law firm announced that it had filed proceedings in the Federal Court of Australia against Spotless, the cleaning business.
The law firm alleges that Spotless misled shareholders who acquired shares between 25 August 2015 and 1 December 2015 by issuing an incorrect profit guidance for its 2016 financial year.
"In August 2015, Spotless stated that its FY16 results would materially exceed the previous financial year," Slater & Gordon Senior Associate Matthew Chuk said. "But just three months later, Spotless' share price fell by approximately 50 per cent when the market reacted to the company unexpectedly pulling its FY16 guidance and issuing a profit downgrade."
Mr Chuk said the profit guidance was highly unlikely to be met, and Spotless knew it. The law firm said that Spotless' 2015 financial result was boosted by "several one-off benefits which would not be repeated in FY16".
"Spotless explained its profit downgrade was based on problems with acquisition integration and underperformance, general market slowdown and expensing of previously capitalised bid costs," Mr Chuk added.
He said Slater & Gordon believe the information was available to Spotless "months earlier".
Slater & Gordon's Class Action follows one launched by IMF Bentham Ltd (ASX: IMF), run by William Roberts Lawyers.
Takeover
With the Spotless share price down over 48% since late 2015, the $1.2 billion company has been subject to a takeover offer from Downer EDI.
The Spotless board has repeatedly told its shareholders to reject Downer EDI's offer. On Tuesday it said the deal "does not represent adequate value" for shareholders.
Then earlier today, the company provided a trading update citing "positive momentum", which it says highlighted reasons why the board said to reject the Downer EDI offer.
"The Board's considered view remains that the Downer Offer of $1.15 per share does not represent adequate value for Spotless," Spotless' Chair Garry Hounsell said.
Spotless shares closed Thursday at $1.12.
The company provided a 10-point list of reasons to reject the offer, including a clear strategy to deliver earnings growth, recent contract wins and the prospect of profit growth in FY18, FY19 and beyond.
"The ball is now clearly in our shareholders' court and the Spotless Board wants to make it clear to them that we genuinely believe they can do better over the medium term by retaining control of Spotless as Australia's leading facilities services provider," Mr Hounsell added.
