By Ross Kelly
SYDNEY-- Ferrovial SA abandoned a 1.02 billion Australian dollar
(US$830 million) takeover bid for Australia's Transfield Services
Ltd., a major setback in the Spanish construction company's plan to
compete for billions of dollars of new infrastructure projects Down
Under.
Transfield on Monday said Ferrovial's offer of A$2.00 per
share--sweetened from an initial approach of A$1.95 in
October--still undervalued the company.
Ferrovial said it ended discussions with Transfield and would
continue to investigate growth options elsewhere. A person familiar
with the matter said Ferrovial won't raise its offer and has no
intention of going hostile by taking the bid directly to
Transfield's shareholders.
"The reality is the two sides are some distance apart in terms
of their view of the business and its concentration of earnings,"
the person said.
One stumbling block was how to value a A$1.22 billion contract
Transfield holds that was coming up for review in October, the
person said. The contract is to service detention camps on the
Pacific Ocean islands of Nauru and Manus, where Australia runs an
offshore visa-processing system for immigrants who try and enter
the country without authorization, often by boat.
Asylum centers have been a hot-button political issue after Reza
Berati, a 23-year-old Iranian asylum seeker, was killed in rioting
at one of the centers in February.
Ferrovial's bid indicated investors were starting to identify
value in Australia's beaten-down mining-services sector, which has
been trying to cope with a cooling commodities boom in recent years
by laying off thousands of workers and slashing costs.
Companies such as Transfield are still suffering from slowing
mining investment as China's economic growth slows. Australian
governments, however, are eager to buttress the local economy by
investing in new infrastructure projects such as roads and
airports, presenting opportunities for contractors.
Transfield is the second construction firm the Madrid-based
multinational has tried to buy in recent months. In July, Ferrovial
offered A$1.4 billion to Leighton Holdings Ltd. to buy engineering
and construction subsidiary John Holland, though it eventually
dropped its bid.
Leighton subsequently sold John Holland this month to China
Communications Construction Co.
Write to Ross Kelly at ross.kelly@wsj.com
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