Fund managers cold on Spotless IPO

Australian fund managers trawling through research for the float of the $2 billion catering services company Spotless have voiced their cynicism on the offering, questioning the pricing on the deal.

One fund manager said the company’s growth prospects were not high enough for the price the private equity vendor was asking.

They said the company would need to rely strongly on support from international investors to support the initial public offering.

But sources close to the deal said several pre-IPO roadshows had been undertaken for offshore investors, who favoured the company.

They attributed local investors’ response to the fact that they had not yet met the Spotless management team, which they suggested was impressive.

“The story is a very good one and it is a revamped business,” a source said. “The management team is compelling.”

Momentum is building for IPOs as Australian fund managers this week received research outlining more details for the float of Spotless.

Beacon Lighting debuted on the ASX yesterday while aged-care provider Japara Holdings will begin trading tomorrow as a company with a market value of $525 million.

Spotless is run by Bruce Dixon, a former chief executive of Healthscope who has worked at Spotless before. Australian investors are sceptical of the $2bn-plus valuation after the company was purchased by Pacific Equity Partners almost two years ago for $1.3bn.

The prospectus for the Spotless float would be launched at month’s end, sources said. Research from investment banks puts the firm’s market value at between $2bn and $2.3bn; its enterprise value was put at between $2.7bn and $2.9bn.

Investment banks Citi, UBS and Deutsche were the joint lead managers for the IPO, which would involve vendor PEP raising about $1bn.