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Adele Ferguson | December 06, 2008 Article from: The Australian
TRANSFIELD Services could become a sitting duck for mining and engineering contractor Downer EDI.
Downer is believed to have offered to buy up to 5 per cent of the struggling services and maintenance operator as part of a $204 million institutional placement.
Transfield Services chairman Tony Shepherd would not confirm or deny the approach but said he could not see the strategic advantage for either company in a tie-up.
He also said any equity alliance would cause concern to some of Transfield's clients.
A Downer EDI spokeswoman said the company did not comment on speculation.
In the past few months Transfield's share price has tanked, leaving its market capitalisation at a vulnerable $620 million, compared with $3.2 billion when its share price was trading at $15.90 just over a year ago.
Downer EDI's market capitalisation is $1.2 billion.
Downer has recently gone head-to-head with Transfield Services on some key contracts.
In September it secured a $350 million 10-year contract from the NSW Roads and Traffic Authority.
The contract, previously with Transfield, generates annual revenue of $35 million for the maintenance of 470km of road in northeastern Sydney.
Downer is also bidding for Yarra Trams, which recently released a short list of two operators, the incumbent (a joint venture between Transdev and Transfield Services) and Downer EDI in a joint venture with Keolis, the largest private-sector French transport group.
Transfield is believed to be waiting with interest to search the list of investors that have taken up the placement. It will no doubt continue to search the share register to see if any potential rivals use nominee companies to build a stake. There is also talk in the market that the Salteri family, which is cashed up after selling its defence business, has also taken shares in the placement.
The Salteri family is believed to have built a small stake in Transfield Services' infrastructure satellite Transfield Services Infrastructure Fund.
In January the Salteri family sold its Tenix defence businesses to BAE Systems Australia for $775 million.
Until 1997, Transfield was jointly owned by the Belgiorno-Nettis and Salteri families. A generational change resulted in the families deciding to split the business.
The Salteris took the defence operations and called it Tenix, while the Belgiorno-Nettis clan took the rest and kept the name Transfield Holdings.
TSE Price at posting:
$1.83 Sentiment: Buy Disclosure: Held
