Australia's Transfield Services Ltd. has laid out conditions for discussions with Ferrovial SA, insisting it will only enter talks about the Spanish company's A$1 billion ($862 million) offer if the bidder agrees not to buy Transfield shares for three months.
Transfield said on Wednesday, Nov. 5, it had been in contact with Ferrovial since rejecting its offer on Oct. 20 and is in the process of collating limited due diligence materials for the Madrid-based group.
"These materials could provide commercially sensitive information to Ferrovial," Transfield Chairman Diane Smith-Gander told shareholders gathered for the company's annual meeting on Wednesday. "Without appropriate legal protection we will not agree to any process which potentially disadvantages…our shareholders."
North Sydney-based Transfield's demands risks checking talks before they begin, with local reports suggesting the Spanish suitor is already considering walking away. However, Transfield shares closed up 2% at A$1.90 on Wednesday, while holding below the A$1.95 value of the Ferrovial offer.
Ferrovial in October expressed its discontent at being given "only limited due diligence," warning it needed sufficient information to be able to make a final offer. The bidder is particularly anxious to secure the fine print of Transfield's $1.22 billion contract to operate Australia's controversial immigrant detention camps, according to Australia's Daily Telegraph.
The Spanish company is also worried about a a recent debt renegotiation by Transfield that precludes renegotiation of the company's debt in the event of a takeover. Ferrovial's superior credit rating would normally enable it to reduce financing costs at Transfield in the event of an acquisition. The Spanish infrastructure services group has an investment grade BBB credit rating with Standard & Poor's Rating Services, one notch higher than Transfield's non-investment grade rating of BB.