On Thursday, April 28 2016, Broadspectrum (BRS) requested that trading in its shares on the Australian Stock Exchange (ASX) be halted pending the release of a statement by BRS.
According to the most recent report, Ferrovial is extending its takeover offer until May 13, as it aims to get at least 90% of buy-offers accepted by that date and will, upon doing so, de-list Broadspectrum from the ASX.
The dramatic turn of events has been a long time in the making, and involves three, interrelated aspects. An additional article will consider the implications of these events for those campaigning for the shutdown of the detention industry.
Firstly, the immediate timing of the suspension of trading was the public announcement on April 28 by the Papua New Guinean Government that the Australian detention camp run by BRS on Manus Island would be closed, after the PNG Supreme Court ruled it was illegal and unconstitutional. Specifically, the PNG Supreme Court ruled that the facility was in breach of the constitutional right of asylum seekers to personal liberty. The detention centre on Manus Island was originally established by the previous Australian Labor Government, the present Liberal-National Government has today announced that it has “no road map” about what to do with those who are still detained on Manus, but the PNG court decision appears to rule out some faux-open air detention camp.
Secondly, BRS (formerly-Transfield Services) has been in turmoil for more than two years.
Its debt-equity ratio still means that it is unable to raise funds in regular financial markets, and it has a bond issue maturity hanging over the future of its shareholdings. Its shareprice has been subject to both dramatic falls as a result of its involvement in the detention industry and subsequent divestment and boycott campaigns against the company and a sudden inflation in value as Ferrovial (Spain border-infrastructure company, FER.MC) revived a stalled takeover bid in recent months. Since being forced to change its name from Transfield Services to Broadspectrum (after the Belgiorno-Nettis divestment in the wake of the Biennale Boycott), the company’s shareprice has only been inflated by the impending takeover by Ferrovial. See note on Ferrovial below. Ferrovial’s bid received something of a boost and an extension when it became clear in February that BRS’s previous announcement to the ASX and shareholders that it was the preferred tenderer was no longer the case, and that BRS would be required to compete with another consortium to submit an amended tender which may not be resolved until the end of the year. This extended the timing of Ferrovial’s bid eventually set at $1.50 per share, which sent BRS shares soaring, to April 22.
On Friday, the Directors of BRS issued a statement to the ASX that they had unanimously agreed to a $769million (AUD) bid from Ferrovial. The BRS Board had previously urged shareholders to reject a number of buy-up offers from Ferrovial, but said late on by Thursday, the PNG court’s decision had increased uncertainty over its future sharevalue:
It is unlikely that the Company will have certainty as to the potential impacts before the current scheduled closing date for the Offer Period on 2 May 2016 Broadspectrum considers that this matter could have a material impact on its future earnings, either positive or negative. [x]
Even so, by the Thursday April 28, Ferrovial was holding an enormous 31.21% of BRS shares in hand and in expectation, and by Friday April 29 had announced they were holding 59%, so the current BRS Board had few options but to cue the paper-shredders, clear out their desks and call a provisional halt to trading.
Thirdly, none of these things would be occurring as they have were it not for the determination of detainees to fight for their freedom.
Those who engaged in protests, hunger strikes, who endured the worst kinds of abuses and torture but still hoped for freedom, the hundreds who were injured and those who were murdered—they are the people who have made this detention camp untenable. Reza Barati, Hamid Khazaei (and Omid on Nauru): Rest In Power.
1. Ferrovial (BMAD: FER)
Ferrovial SA (BMAD: FER) is an enormous infrastructure conglomerate, which trades on the Madrid Stock Exchange. It was founded in 1952 by the Del Pino family, when Spain was a fascist dictatorship and grew with the support of the Francoist government. It presently owns such things as around a quarter of Heathrow Airport Holdings, a number of toll roads such as the Chicago Skyway, and other ventures.
Broadspectrum’s future with Ferrovial
What does Ferrovial get? Around half of BRS’s revenue has been derived from detention outsourcing. With the closure of Manus Island, and remaining uncertainty over whether BRS will win the contract to run the detention camp on Nauru (and whether Nauru will remain open), it is unclear whether BRS will continue to be a major company in the detention industry.
For Ferrovial, BRS’s importance lies in giving that European megacorp a bigger foothold in the Asia-Pacific infrastructure and outsourcing field:
The acquisition supports Ferrovial Services’ entry into the Australian market by integrating a leading services company with a significant platform across various segments. Broadspectrum operates in Australia and other countries like USA, Canada and Chile, and in the energy, mining, telecommunications, social, property, defence and infrastructure maintenance markets.
In relation to the provision of services at the regional processing centres in Nauru and Manus province, these services were not a core part of the valuation and the acquisition rationale of the offer, and it is not a strategic activity in Ferrovial’s portfolio. Ferrovial’s view is that this activity will not form part of its services offering in the future. [x]
Suggestions that Ferrovial does not plan to continue in the detention industry should be taken with a truckload of salt. In any event, BRS still has a number of contracts: Department of Defence, an Easternwell contract with Chevron; property services contract with the NSW Land and Housing Corporation; a contract with AGL Energy Limited; Queensland Urban Utilities; roads construction contracts in New Zealand; Transpower; South East Water; and some smaller contracts.
Still, as lawyers for detainees on Manus prepare a case for possibly billions of dollars in compensation for their clients in the wake of the PNG Supreme Court decision, it may be that Ferrovial is saddled with enormous liabilities even if BRS is no longer in the detention business.