Spotless – Target’s Statement

Page 1 of 1

1 September 2020


Company Announcements Office
ASX Limited
Exchange Centre
Level 4, 20 Bridge Street
SYDNEY NSW 2000



Dear Sir/Madam

Please find attached Target’s Statement issued by Spotless Group Holdings Limited today in
response to the off-market takeover bid made by Downer EDI Services Pty Ltd, a wholly owned
subsidiary of Downer EDI Limited.

Yours sincerely,
Downer EDI Limited

Robert Regan
Company Secretary

Downer EDI Limited
ABN 97 003 872 848
Triniti Business Campus
39 Delhi Road
North Ryde NSW 2113
1800 DOW NER
www.downergroup.com

Spotless Group Holdings Limited (ACN 154 229 562)
This is an important document and requires your immediate attention. If you are in any doubt about what to do, you should
contact your broker or your legal, financial or other professional advisor as soon as possible.

Target’s Statement
This Target’s Statement has been issued in response to the off-market takeover bid made by Downer
EDI Services Pty Ltd, a wholly owned subsidiary of Downer EDI Limited.
The Independent Directors of Spotless unanimously recommend that, in the absence
of a superior proposal, you ACCEPT the Offer made by Downer Services to
purchase all of your Spotless Shares for $1.00 cash per Spotless share plus, for
every 17.92741 Spotless Shares accepted into the Offer, a contingent share option
exercisable over 1 Downer Share, subject to the future market prices of Downer
shares.
The Independent Expert has concluded that the Offer is
fair and reasonable for
Spotless Shareholders not associated with Downer.
This is an important document and requires your immediate attention.
If you are in doubt as to how to deal with this document, you should consult your financial or
other professional adviser immediately.
Spotless Shareholders can call Spotless Shareholder Information Line on 1300 202 738 (within
Australia) or +61 1300 202 738 outside Australia if they require assistance.
Oaktower Partnership Gilbert + Tobin Ernst & Young
Financial Adviser Legal Adviser Tax Adviser

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Important notices
Key Dates
Date of the Offer Thursday, 20 August 2020
Date of this Target’s Statement Tuesday, 1 September 2020
Close of the Offer (unless extended or withdrawn) Monday, 21 September 2020
Nature of this document
This document is a Target’s Statement issued by Spotless Group Holdings Limited (ACN 154 229 562)
(Spotless) under Part 6.5, Division 3 of the Corporations Act in response to the Bidder’s Statement
dated 12 August 2020 issued by Downer EDI Services Pty Ltd (ACN 137 732 042) (Downer
Services), a wholly owned subsidiary of Downer EDI Limited (ACN 003 872 848) (Downer), for all
Spotless Shares in which Downer Services does not currently have a relevant interest (Offer).
ASIC disclaimer
A copy of this Target’s Statement has been lodged with ASIC on 1 September 2020. None of ASIC or
any of its respective officers takes any responsibility for the content of this Target’s Statement.
Defined terms and interpretation
Capitalised terms used in this Target’s Statement are defined in Section 11. The rules of interpretation
that apply to this Target’s Statement are also set out in Section 11.
No account of personal circumstances
The Independent Directors of Spotless recommend that you read this Target's Statement, the Bidder's
Statement and the Supplementary Bidder’s Statement in full and seek independent advice if you have
any queries in respect of the Offer. The information contained in this Target’s Statement does not
constitute personal advice. In preparing this Target’s Statement, Spotless has not taken into account
the objectives, financial situation or needs of individual Spotless Shareholders. It is important that you
consider the information in this Target’s Statement in light of your particular circumstances. You
should seek advice from your financial, legal or other professional adviser before deciding whether to
accept or reject the Offer.
Forward-looking statements
This Target’s Statement contains forward-looking statements, including statements of current intention
or expectation. As such forward-looking statements relate to future matters, they are subject to known
and unknown risks, uncertainties, assumptions and other factors that may cause actual results,
performance or achievements to differ materially from the anticipated results, performance or
achievements expressed, projected or implied by such forward-looking statements.
None of Spotless or the Directors, officers and advisers give any representation, assurance or
guarantee to Spotless Shareholders or any other person as to the accuracy or likelihood of fulfilment
of any forward looking statement, or any events or results expressed or implied in any forward looking
statement, except to the extent required by law. You are cautioned not to place undue reliance on any
forward looking statement. The forward looking statements in this Target’s Statement (including in the

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Independent Expert’s Report) reflect views held only as at the date of this Target’s Statement. Except
as required by applicable law, Spotless does not undertake to update or revise these forward-looking
statements nor any other statements (written or oral) that may be made from time by or on behalf of
Spotless, whether as a result of new information, future events or otherwise.
Disclaimer as to information
The information on Downer and Downer Services contained in this Target’s Statement has been
compiled from and prepared by Spotless using information obtained from Downer or other publicly
available information (including information contained in the Bidder’s Statement) and has not been
independently audited or verified by Spotless or its advisers. Accordingly, subject to the Corporations
Act, Spotless does not make any representation or warranty (express or implied) as to the accuracy or
completeness of such information. If any information obtained from Downer or the public sources is
inaccurate or incomplete, this may affect the information included in this Target's Statement. In
particular, if the information has been used as the basis for forward-looking statements in this Target's
Statement, this may add to the risk that actual values, results, performance or achievements will differ
materially from those expressed or implied by the forward-looking statements.
Independent Expert’s Report
The Independent Expert’s Report has been prepared by the Independent Expert for the purposes of
this Target’s Statement and the Independent Expert takes full responsibility for that report. Neither
Spotless nor any of its officers, employees or advisers assumes any responsibility for the accuracy or
completeness of the Independent Expert’s Report.
Foreign jurisdictions
The release, publication or distribution of this Target’s Statement may be restricted by law or
regulation in some jurisdictions outside Australia. Accordingly, persons outside Australia who come
into possession of this Target’s Statement should seek advice and observe any such restrictions. Any
failure to comply with such restrictions may constitute a violation of applicable laws or regulations.
This Target’s Statement has been prepared in accordance with Australian law and the information
contained in this Target’s Statement may not be the same as that which would have been disclosed if
this Target’s Statement had been prepared in accordance with laws and regulations outside Australia.
Privacy
Spotless has collected your information from the Spotless share register for the purpose of providing
you with this Target’s Statement. Such information may include the name, contact details and
shareholdings of Spotless Shareholders and the names of persons appointed to act as proxy, attorney
or corporate representative of Spotless Shareholders. Without this information, Spotless would be
hindered in its ability to issue this Target’s Statement.
The Corporations Act requires the name and address of shareholdings to be held in a public register.
Personal information of the type described above may be disclosed on a confidential basis to Spotless
and its Related Bodies Corporate, holders of Spotless Shares and external service providers
(including the Share Registry), and may be required to be disclosed to regulators, such as ASIC. If you
would like details of information about you held by Spotless, please contact us on the Spotless
Shareholder Information Line as set out below.
Diagrams
Diagrams appearing in this Target’s Statement are illustrative only and may not be drawn to scale.

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Rounding
A
number of figures, amounts, percentages, prices, estimates, calculations of value and fractions in
this Target’s Statement are subject to the effect of rounding. Accordingly, the actual calculation of
these figures may differ from the figures set out in this Target’s Statement.
Spotless Shareholder Information Line
If you have any questions in relation to the Offer, please contact the Spotless Shareholder Information
Line on 1300 202 738 (within Australia) or +61 1300 202 738 (outside Australia) between 9am and
5.30pm (AEST) on Business Days.

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Contents
Contents 5
Letter from the Independent Chairman 6
1 Reasons why you should ACCEPT the Offer 9
2 Reasons why you may decide not to accept the Offer 12
3 Frequently asked questions 14
4 Your choices as a Spotless Shareholder 19
5 Important information about the Offer 21
6 Information relating to Spotless 23
7 Information relating to Downer 30
8 Risk factors 31
9 Taxation considerations 37
10 Additional information 42
11 Glossary and Interpretation 48

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Letter from the Independent Chairman
1 September 2020
Dear Spotless Shareholders
On 21 July 2020, Downer, a majority shareholder of Spotless via its wholly owned subsidiary Downer
Services, announced an off market offer to acquire all ordinary shares in Spotless which Downer or
Downer Services does not already own. Downer also announced that it has entered into a call option
deed with Coltrane Master Fund, L.P. (which has a current Relevant Interest in approximately 11.8%
of Spotless) (Coltrane) which grants Downer a call option over 2.99% of Spotless Shares (Call
Option), and which on exercise would increase Downer’s ownership interest in Spotless above the
90% threshold required for it to proceed to compulsory acquisition.
As a result of its pre-bid 87.8% shareholding in Spotless and the Call Option, Downer was already in a
position to proceed to 100% ownership of Spotless on exercise of the Call Option notwithstanding the
Offer. The Offer opened on 20 August 2020 and Coltrane has already accepted its entire shareholding
to Downer. Downer now holds a Relevant Interest in approximately 99.6% of Spotless Shares and
lodged a Compulsory Acquisition Notice with ASIC on 25 August 2020 to acquire the remainder of
Spotless Shares, and which has been dispatched to Spotless Shareholders. Spotless Shareholders
have until the close of the Offer (Monday, 21 September 2020) to accept the Offer after which Downer
intends to compulsorily acquire all outstanding shares in Spotless. If your Spotless Shares are
compulsorily acquired then you will receive the consideration later than if you had accepted under the
Offer.
Under the terms of the Offer, you are being offered $1.00 cash per Spotless Share plus, for every
17.92741 Spotless Shares accepted into the Offer, a contingent share option exercisable over 1
Downer Share, subject to the future market prices of Downer shares (Downer Contingent Share
Options). The Downer Contingent Share Options are allotted into and exercisable in three tranches.
Each tranche has a different ‘target price condition’ attached which, when satisfied, will result in
Downer Shares being issued.
Following Downer’s announcement on 21 July 2020, Spotless established an Independent Board
Committee (IBC) to consider the Offer. The IBC comprises the two Independent Directors, being John
Humphrey, Non-Executive Director and Chairman and Simon McKeon, Non-Executive Director. The
other Directors of Spotless (Non-Independent Directors) are regarded as representatives of Downer
and were therefore not appointed to the IBC. The Non-Independent Directors are not making a
recommendation to Spotless S hareholders in relation to the Offer.
T
he IBC appointed Oaktower Partnership as financial adviser, Gilbert + Tobin as legal adviser and
Ernst & Young as tax adviser to assist the IBC to evaluate and respond to the Offer by Downer
Services. The Independent Directors have carefully considered the Offer in all the current
circumstances (including the prospects for Spotless in the absence of the Offer and Downer having
commenced the process to compulsorily acquire all shares in Spotless not owned by it at completion
of the Offer). The Independent Directors recommend that, in the absence of a superior proposal, you
should ACCEPT the Offer.
The IBC appointed Deloitte Corporate Finance to prepare the Independent Expert’s Report. The
Independent Expert has concluded that the Offer is fair and reasonable for Spotless Shareholders not
associated with Downer. A copy of the Independent Expert's Report is included as Attachment A to
this Target's Statement, and you are encouraged to read that report in full. The Independent Expert
assessed the estimated market value of Spotless Shares to be in the range of $0.83 and $1.11 per
Spotless Share. The Independent Expert has assessed the estimated market value of the Offer
consideration to be in the range of $1.07 and $1.12 per Spotless Share. As the estimated value of the

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Offer c
onsideration, as assessed by the Independent Expert is within the range of its estimate of the
market value of a Spotless Share, the Independent Expert has concluded that the Offer is fair and
reasonable to Spotless Shareholders not associated with Downer.
All Spotless Shareholders should have already received a copy of the Bidder's Statement and
Supplementary Bidder’s Statement from Downer Services in the mail, which sets out the detailed
terms of the Offer, and includes an Acceptance Form.
If you have not received a Bidder’s Statement, Supplementary Bidder’s Statement or Acceptance
Form, you should call Downer’s Offer Information Line on 1300 157 206 (within Australia) or +613
9415 4087 (outside Australia) between 8.30am and 5.30pm ( Sydney time) on Business Days.
Reasons for the IBC’s Recommendation
This Target's Statement sets out the formal response of the Independent Directors to the Offer,
including the reasons why the Independent Directors unanimously recommend that you ACCEPT the
Offer, in the absence of a superior proposal.
In summary:
1 The Independent Expert, Deloitte Corporate Finance, has concluded that the Offer is fair
and reasonable for Spotless Shareholders not associated with Downer;
2 The Offer is unanimously recommended by your Independent Directors, with the
Independent Director, Simon McKeon, who owns shares in Spotless, intending to accept
the Offer for all his Spotless Shares;
3 Coltrane has already accepted the Offer and Downer now has an approximate 99.6%
shareholding in Spotless. Downer has commenced the compulsory acquisition process to
acquire your Spotless Shares after the end of the Offer Period and you will receive the
same consideration that you would have received if you accept the Offer. If you accept the
Offer you will receive the consideration earlier than those Spotless Shareholders whose
Shares are compulsorily acquired after the close of the Offer;
4 The Offer from Downer is unconditional and is made in respect of all of your Spotless
Shares, and if accepted by you, $1.00 cash per Spotless Share will be paid to you within 7
days of your acceptance of the Offer;
5 In addition to $1.00 cash per Spotless Share, Spotless Shareholders that accept the Offer
will also receive Downer Contingent Share Options. These are zero priced, non-voting,
non-quoted contingent share options and give Spotless Shareholders the potential to
receive shares in Downer, currently an ASX listed company, over the next four years
(subject to the future market prices of Downer shares and the terms of the Downer
Contingent Share Options);
6 The Offer is the best available offer for Spotless Shares at this time, noting that the
Independent Directors consider that it is unlikely a superior offer will emerge from another
bidder, given the existing shareholding of Downer Services in Spotless (and given Coltrane
has already accepted the Offer which has enabled Downer to proceed to compulsorily
acquire any Spotless Shares not owned by it after the close of the Offer); and
7 Downer already has effective majority control of Spotless and is in a position to control the
composition of the Spotless Board and the strategic direction of Spotless. By accepting the
Offer, Spotless Shareholders will no longer be directly exposed to the risks of an

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investment in the unlisted Spotless Group (inc
luding the risk that future dividends are fully
controlled by Downer);
Each of these reasons is explained in greater detail in this Target’s Statement.
Further Information
The Offer is scheduled to close at 7:00pm (AEST) on Monday, 21 September 2020. To accept the
Offer, simply follow the instructions outlined in the Bidder's Statement, the Supplementary Bidder’s
Statement and the Acceptance Form and section 4.1(a) of this Target's Statement. No action is
required if you decide not to accept the Offer.
We encourage you to read this Target’s Statement carefully, and to seek independent advice if you are
in any doubt as to how to respond to the Offer.
If yo
u need any more information about the Offer, we recommend that you seek professional
advice,
or call 1300 202 738 (within Australia) or +61 1300 202 738 (outside Australia) Monday to Friday
between 8.30am and 5.30pm (AEST), or go to www.spotless.com.
Y
ours sincerely
J
ohn Humphrey
Director and Chairman of the Independent Board Committee

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1 Reasons why you should ACCEPT the Offer
This section summarises the key reasons why the Independent Directors unanimously
recommend to Spotless Shareholders that they ACCEPT the Offer, in the absence of a superior
proposal.

1.1 The Independent Expert has concluded that the Offer is fair and reasonable for
Spotless Shareholders not associated with Downer
The Independent Directors appointed Deloitte Corporate Finance to prepare an
Independent Expert's Report on the Offer. The Independent Expert concluded that the
Offer is fair and reasonable for Spotless Shareholders not associated with Downer.

The Independent Expert has assessed the estimated market value of Spotless Shares to
be in the range of $0.83 to $1.11 per Spotless Share.
The Independent Expert has assessed the estimated market value of the Offer
consideration to be in the range of $1.07 to $1.12 per Spotless Share as comprised as
follows:
Offer Consideration per Spotless Share
Component Low High
Cash $1.00 $1.00
Downer Contingent Share Options
1
$0.07 $0.12
Total $1.07 $1.12
Note
1. Represents the value of Downer Contingent Share Option that one Spotless Share is entitled
to (i.e. 1/17.92741 of a Downer Contingent Share Options).
As the estimated value of the Offer consideration, as assessed by the Independent
Expert is within the range of its estimate of the market value of a Spotless Share, the
Independent Expert has concluded that the Offer is fair and reasonable.
The Independent Expert has assessed the consideration for the Downer Contingent
Share Options to be between $0.07 and $0.12 per Spotless Share. The Independent
Expert has concluded that even excluding this component of the consideration (if a
Spotless Shareholder was to hold the view that there is too much uncertainty associated
with the achievability of the Downer Contingent Share Options target prices) because the
$1.00 cash component of the consideration is slightly higher than the mid-point of his
assessed market value of a Spotless Share that in their opinion the Offer would still be
fair.
A copy of the Independent Expert's Report is attached to this Target's Statement as
Attachment A.
The Independent Directors encourage shareholders to read the Independent Expert's
Report in its entirety before making a decision as to whether or not to accept the Offer.

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1.2 Downer has already commenced the compulsory acquisition process to acquire
your Spotless Shares
Coltrane has already accepted the Offer in relation to approximately 11.8% of Spotless
Shares to Downer. Consequently, Downer has now proceeded to compulsory acquisition,
which would be completed after the end of the Offer Period. Downer lodged a
Compulsory Acquisition Notice with ASIC on 25 August 2020, and unless you
successfully challenge the compulsory acquisition process, your Spotless Shares will be
compulsorily acquired and you will receive the same consideration that you would have
received under the Offer. However, you will receive the consideration later than those
Spotless Shareholders who accept the Offer. Section 5.5 of this Target’s Statement sets
out further details regarding the compulsory acquisition procedure (including information
on your rights to challenge the compulsory acquisition).
1.3 The Offer is unconditional and has a cash component which delivers certain value
for your Spotless Shares
The unconditional Offer provides partial certainty of value, with part of the consideration in
cash.
If you accept the Offer, you will (in addition to receiving the Downer Contingent Share
Options):
− be paid $1.00 in cash for each Spotless Share which you hold;
− not incur any stamp duty or brokerage fees under the Offer (section 9.2(h) of this
Target’s Statement sets out further details regarding stamp duty); and
− receive payment of the cash component of the Offer within 7 days after the date of
your acceptance.
Further to the cash component of the Offer providing certain value for your investment, by
accepting the Offer you will substantially reduce your direct exposure to the risks inherent
in continuing to hold Spotless Shares, including risks associated with Spotless’ business
and general industry risks. Please refer to section 8.2 for further information about these
risks.
1.4 The Offer provides Spotless Shareholders with the opportunity to receive Downer
Shares (subject to the future market price of the Downer Shares and the terms of
the Downer Contingent Share Options)
The Downer Contingent Share Options give Spotless Shareholders the possibility to have
exposure to the larger and more diverse Downer business through three tranches of zero
priced, non-voting and non-quoted contingent options that may convert into Downer
Shares over a four-year period.
If the future price of Downer Shares satisfies a ‘target price condition’ attached to a
tranche of Downer Contingent Share Options, Spotless Shareholders will be entitled to
Downer Shares. On receipt of Downer Shares, current Spotless Shareholders would be
participants in a large and diverse ASX-listed company and benefit from any upside in the
market value of those Downer Shares, a benefit Spotless Shareholders do not currently
have as shareholders in an unlisted public company. However, there is no guarantee that
the exercise conditions of the Downer Contingent Share Options will be met during the
option period.

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See section 1, section 10.2 and Annexure B of the Bidder’s Statement for further
information on the terms of the Downer Contingent Share Options.
The Downer Contingent Share Options will exercise automatically if the relevant Downer
share price targets and other conditions of the Downer Contingent Share Options are
met, provided Spotless Shareholders do not select the manual exercise alternative.
If you elect to manually exercise your Downer Contingent Share Options, you bear the
onus of giving notice to Downer of your intention to exercise your Downer Contingent
Share Options within 20 Business Days of the relevant “target price condition” being
satisfied. If you do not correctly give notice of your manual exercise to Downer, you may
lose the right to receive Downer Shares.
Spotless Shareholders who decide to accept the Offer should take the automatic exercise
alternative rather than electing to manually exercise the Downer Contingent Share
Options. You do not need to fill out the election notice which accompanies the Bidder’s
Statement. See section 2 of the Bidder’s Statement for further information.
1.5 No superior proposal has emerged as at the date of this Target’s Statement
As at the date of this Target's Statement, no alternative proposals to the Offer have been
put to Spotless or are currently under consideration by Spotless, and the Independent

Directors are not aware of any other offer or proposal that might be an alternative to the
Offer.
In light of Downer’s Relevant Interest in approximately 99.6% of Spotless Shares, the

Independent Directors consider that it is unlikely that a superior proposal will be
forthcoming before the end of the Offer Period.
Similarly, the Independent Expert's Report states that an alternative takeover offer is unlikely
as any such offer would require Downer to sell its shares which it considers to be unlikely. On
this basis, Spotless Shareholders not associated with Downer are unlikely to receive a superior
offer.
1.6 Downer already has effective majority control of Spotless and is in a position to
control the composition of the Spotless Board and the strategic direction of
Spotless
Downer has effectively controlled Spotless since the close of its takeover offer in August
2017. Spotless was delisted from the ASX in August 2019 and Spotless Shareholders
have not been able to trade its shares on-market since that date.
Accepting the Offer will mean Spotless Shareholders will no longer be exposed to the
risks associated with being shareholders in an unlisted entity in which dividends are fully
controlled by Downer.

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2 Reasons why you may decide not to accept the Offer
This section summarises the key reasons why you may decide not to accept the Offer.
As noted in section 5.5 of this Target’s Statement, Downer is entitled to proceed to compulsorily
acquire all of your Spotless Shares after close of the Offer and has commenced this process.
As such, even if you do not accept the Offer, you are unlikely to be able to continue as a
Spotless Shareholder and are likely to be compelled by law to sell your Spotless Shares to
Downer Services.
2.1 You may disagree with the Independent Directors' recommendation or the
conclusions of the Independent Expert
You may believe that the Offer Price of $1.00 per Spotless Share plus the Downer
Contingent Share Options is insufficient and you may hold a different view as to the value
of Spotless Shares to both the Independent Directors and the Independent Expert.
However, as noted in section 5.5, Downer has already commenced the compulsory
acquisition process and you may be required to dispose of your Spotless Shares to
Downer Services for the Offer Price in any event.
2.2 You may wish to apply to the court to prevent the compulsory acquisition of your
shares
If you wish to try to prevent the compulsory acquisition of your Spotless Shares
proceeding, you may apply to the court under Part 6A.1 of the Corporations Act.
The court will only order the Spotless Shares not be compulsorily acquired if the court is
satisfied that the consideration is not fair value for the securities. Although it is a separate
process Spotless Shareholders should understand that the Independent Expert has
determined the Offer to be fair and reasonable for Spotless Shareholders not associated
with Downer. If you wish to challenge the compulsory acquisition of your shares, you
should seek your own legal advice as to the process for such a challenge.
See section 5.5 of this Target’s Statement for further information on the compulsory
acquisition process.
2.3 You may receive higher consideration if you successfully challenge the
compulsory acquisition in court
If the court finds the consideration is not fair value, and your Spotless Shares are
therefore not compulsorily acquired, Downer may initiate a subsequent compulsory
acquisition process in respect of any remaining Spotless Shareholders, and that may be
at a revised consideration. If you have already accepted the Offer, or if you do not
challenge the compulsory acquisition process, you will not receive any revised
consideration under any such subsequent process (if it were to occur).
See section 5.5 of this Target’s Statement for further information on the compulsory
acquisition process.
2.4 You may consider that there is potential for a superior proposal to emerge
You may believe that a superior proposal for all Spotless Shares could emerge in the
future.

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If a superior proposal is announced, Spotless Shareholders who have accepted the Offer
will not be able to withdraw their acceptance in order to accept a superior proposal,
unless the Offer is withdrawn. However, if Downer varies the Offer to increase the
consideration it is offering for your Spotless Shares you will be entitled to receive the
increased consideration even if you have already accepted the Offer.
You should note that, as at the date of this Target's Statement, no superior proposal has
been received and the Independent Directors consider it unlikely that a superior proposal
will emerge, particularly as Downer and Downer Services has a Relevant Interest in
approximately 99.6% which is above the threshold required for compulsory acquisition,
and Downer Services has commenced the compulsory acquisition process.
Other matters
In considering whether to accept the Offer, the Independent Directors encourage you to:
 read both this Target’s Statement (including the Independent Expert’s Report) and the
Bidder’s Statement and Supplementary Bidder’s Statement in their entirety;
 have regard to your individual risk profile, portfolio strategy, tax considerations and
financial circumstances;
 obtain independent financial advice from your own broker or financial adviser regarding
the Offer; and
 obtain taxation advice on the consequences for you of accepting the Offer.

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3 Frequently asked questions
This section answers some commonly asked questions about the Offer. It is not intended to address all
relevant issues for Spotless Shareholders. This section should be read together with all other parts of
this Target’s Statement (including the Independent Expert’s Report) and the Bidder’s Statement.
Question Answer
Who is making the
Offer?
Downer EDI Services Pty Ltd (Downer Services), a wholly owned subsidiary of Downer
EDI Limited (Downer).
Downer Services made a takeover offer for Spotless in 2017 and obtained
approximately 87.8% of Spotless Shares.
Following Coltrane’s acceptance of the Offer, Downer and Downer Services have
increased their Relevant Interest to approximately 99.6% of Spotless Shares (as at the
date of this Target Statement).
Information in relation to Downer is set out in section 4 of the Bidder’s Statement or can
otherwise obtained via Downer’s website at https://www.downergroup.com/. Information
in relation to Downer is also referred to in section 7 of this Target’s Statement and in
Section 1.2 of the Independent Expert’s Report, which is contained as Attachment A to
this Target’s Statement.
What is the
Bidder’s
Statement?
The Bidder’s Statement contains information on the Offer. The law requires Downer to
send it to you. Downer lodged its Bidder’s Statement with ASIC on 12 August 2020.
Downer lodged a Supplementary Bidder’s Statement with ASIC on 25 August 2020.

What is this
Target's
Statement?

This booklet comprises the Target’s Statement and has been prepared by Spotless.
Spotless is required by law to produce this Target’s Statement in response to the Offer.
The Target’s Statement contains information to help you decide whether to accept the
Offer, including the recommendation by the IBC and the accompanying Independent
Expert’s Report.
What is Downer
offering for my
Spotless Shares?
The Offer Price under the Offer is $1.00 cash per Spotless Share plus one Downer
Contingent Share Option for every 17.92741 Spotless Shares you own.
How many
Downer
Contingent Share
Options will I
receive?
For every 17.92741 Spotless Shares you own, you will receive 1 Downer Contingent
Share Option which, on exercise if relevant target price conditions are satisfied, will
entitle you to 1 Downer Share.
Your total number of Downer Contingent Share Options will be allocated into three
tranches. This is subject to rounding (as set out in Annexure B of the Bidder’s
Statement). For example, if you receive 100 Downer Contingent Share Options, 33 will
be allocated to ‘Tranche 1 Series’, 33 to ‘Tranche 2 Series’ and 34 to ‘Tranche 3 Series’.
See section 1, section 10.2 and Annexure B of the Bidder’s Statement for further
information.
When can the
Downer
Contingent Share
Options be
exercised?
The Downer Contingent Share Options are exercisable for a period of 4 years from the
date the Offer opened (which was 20 August 2020). If the target price condition attached
to a tranche of Downer Contingent Share Options has not been satisfied within this
period, the Downer Contingent Share Options in that tranche will lapse.
At what price do
the Downer
Contingent Share
Options exercise
The target price condition for a tranche of Downer Contingent Share Options is satisfied
when Downer’s 5-day VWAP is equal to or exceeds the relevant target price as set out
below (and subject to certain adjustments):

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Question Answer
into Downer
Shares?








See section 10.2 and Annexure B of the Bidder’s Statement for further information.

Series Target price
Tranche 1 Series $6.382
Tranche 2 Series $6.873
Tranche 3 Series $7.364

Do I have to pay
anything to
exercise the
Downer
Contingent Share
Options?
No. The Downer Contingent Share Options have a zero exercise price.
See section 10.2 and Annexure B of the Bidder’s Statement for further information.
How do I exercise
my Downer
Contingent Share
Options?
Unless you make a manual exercise election your Downer Contingent Share Options
will automatically exercise (and you will be issued Downer Shares) where the relevant
target price condition has been satisfied.
See section 2 of the Bidder’s Statement for further information.
Am I guaranteed
to receive Downer
Shares?
No. You will receive Downer Contingent Share Options, which on exercise entitles you
to Downer Shares. The ability to exercise a Downer Contingent Share Option (and
hence receive a Downer Share) is subject to Downer’s 5-day VWAP meeting or
exceeding the target price attached to the relevant tranche of Downer Contingent Share
Options. There is no guarantee this will occur (and therefore there is no guarantee you
will receive Downer Shares).
See section 4.8 of the Bidder’s Statement for recent trading data for Downer Shares on
the ASX since August 2019. You should note however that historical trading data of
Downer Shares is not a guarantee of future performance.
What rights do I
have as a holder
of Downer
Contingent Share
Options?
The Downer Contingent Share Options are an irrevocable offer by Downer to you to
subscribe for Downer Shares, subject to the terms of the Downer Contingent Share
Options as set out in Annexure B of the Bidder’s Statement.
Downer Contingent Share Options do not confer any voting rights, any rights to
participate in new issues of capital by Downer or any right to a dividend or any
entitlement to Downer’s assets if it were wound up.
If the Downer Contingent Share Options are exercised into Downer Shares, you will
receive ordinary shares in Downer and have the rights and liabilities of an ordinary
shareholder as set out in Downer’s constitution. Such rights include, but are not limited
to, the right to attend and vote at shareholder meetings, receive dividends and
participate in capital distributions.
See section 10.2, section 10.3 and Annexure B of the Bidder’s Statement for further
information.
What happens to
my Downer
Contingent Share
Options if there is
The terms of the Downer Contingent Share Options do not expressly provide for their
treatment in the event of a takeover bid for Downer.
As set out above, the Downer Contingent Share Options are exercisable when the
relevant target price condition for each tranche of Downer Contingent Share Options is
met or exceeded. If a takeover bid for Downer was to result in the 5-day VWAP for

page | 16

Question Answer
a takeover bid for
Downer?
Downer shares satisfying the relevant target price condition attached to each tranche of
Downer Contingent Share Options, then the relevant Downer Contingent Share Options
would be become exercisable in accordance with their terms.
If the relevant target price condition is not satisfied, the Downer Contingent Share
Options would continue in accordance with their terms. Those terms do not expressly
provide for the treatment of the Downer Contingent Share Options in the event that
Downer shares cease to be traded on ASX. Given this, there is a risk that such
circumstances may result in a loss (including a total loss) of value of the Downer
Contingent Share Options, or that holders of the Downer Contingent Share Options may
need to take action (including, potentially, court or Takeovers Panel proceedings) to
seek to realise value for their Downer Contingent Share Options.”
See Annexure B of the Bidder’s Statement for the full terms of the Downer Contingent
Share Options.
Does Downer or
Downer Services
already have an
interest in
Spotless Shares?
As at the date of this Target Statement. Downer has a Relevant Interest in
1,098,154,638 Spotless Shares, equating to approximately 99.6% of the total issued
capital of Spotless.
Prior to the Offer, Downer had a Relevant Interest in 87.8% of Spotless Shares. Downer
entered into the Call Option which gave it a call option over 2.99% of Spotless Shares
held by Coltrane. Following opening of the Offer, Downer exercised the Call Option
which required Coltrane to accept the Offer in respect of those Spotless Shares.
Coltrane has also accepted the Offer in respect of its remaining shareholding in
Spotless, resulting in Downer currently having a Relevant Interest in approximately
99.6% in Spotless.
What choices do I
have in response
to the Offer?
As a Spotless Shareholder, you have the following three choices in respect of your
Spotless Shares:
 accept the Offer, in which case you should follow the
instructions in the Bidder's
Statement;
 sell your Spotless Shares, unless you have
previously accepted the Offer and
have not validly withdrawn that acceptance; or
 reject the Offer by doing nothing.
There are several implications in relation to each of the above
choices. A summary of
these implications is set out in section 4 of
this Target's Statement.

You should seek legal, financial and taxation advice from your professional adviser
regarding the action that you should take in relation to the Offer.
Why was the IBC
established?
The IBC is a committee of the Spotless Board which was established pursuant to
internal conflict management protocols which were put in place by Spotless when
Downer’s Offer was announced on 21 July 2020. The purpose of the IBC is to evaluate
and respond to the Offer, and otherwise manage conflicts which arise in relation to the
Offer in an appropriate manner.
The IBC comprises of John Humphrey (Non-Executive Director and Chairman) and
Simon McKeon (Non-Executive Director).
The other Directors of Spotless (who are not members of the IBC) are Grant Fenn,
Peter Tompkins and Michael Ferguson.
What are the
Independent
Directors
recommending?
The Independent Directors unanimously recommend that you accept the Offer, in the
absence of a superior proposal. The reasons for the Independent Directors’
recommendation are set out in section 1 of this Target’s Statement.

page | 17

Question Answer
Will I be forced to
sell my Spotless
Shares?
You can be forced to sell your Spotless Shares if Downer Services:
 receives acceptances giving it (or it otherwise acquires) a Relevant Interest in at
least 90% (by number) of the Spotless Shares; and
 acquires at least 75% (by number) of the Spotless Shares in which Downer or its
associates did not have a Relevant Interest as at 8.00am (Sydney time) on
Wednesday, 12 August 2020.
Both of these limbs were satisfied once Coltrane accepted the Offer. Downer is now
entitled to proceed to compulsory acquisition of Spotless Shares held by Spotless
Shareholders who do not accept the Offer and retain their Spotless Shares, and it has
commenced this process. If your Spotless Shares are compulsorily acquired, you will
receive the same consideration for your Spotless Shares that you would have received
under the Offer, as if you accepted the Offer. However, it will take you longer to receive
your consideration than if you accept the Offer before the end of the Offer Period.
If you do not wish to have your Spotless Shares compulsorily acquired, you may make
an application to the court to prevent compulsory acquisition. However, the Court may
only make an order to prevent the compulsory acquisition of your Spotless Shares if it
is satisfied that the consideration for your Spotless Shares is not fair. If you wish to
challenge the compulsory acquisition of your shares, you should seek your own legal
advice as to the process for such a challenge.
Please refer to section 5.5
of this Target's Statement for more information about the
compulsory acquisition process.
When does the
Offer close?
The Offer Period must remain open for at least 1 month. It is currently scheduled to
close at 7.00pm (AEST) on Monday, 21 September 2020 but can be extended in
certain circumstances.
The Independent Directors will keep you informed if there are any material
developments in relation to the Offer. Spotless Shareholders are also encouraged to
monitor the Spotless website at www.spotless.com for any updates on the Offer.
Can the Offer
Period be
extended?
As the Offer is unconditional, Downer Services may extend the Offer Period at any time
before the end of the Offer Period. The maximum Offer Period is 12 months.
There will be an automatic extension of the Offer Period if, within the last 7 days of the
Offer Period, Downer Services increases the consideration offered. If that happens, the
Offer will be automatically extended so that it ends 14 days after that event.
How do I accept
the Offer?
Instructions on how to accept the Offer are set out in section 4.1(a) of this Target's
Statement, section 1 of the Bidder’s Statement, section 1.10 of Annexure A of the
Bidder's Statement and on the Acceptance Form which accompanies the Bidder's
Statement. If you want to accept the Offer, you should follow these instructions carefully
to ensure that your acceptance is valid.
What are the
consequences of
accepting the
Offer now?
If you accept the Offer, you will be obliged to sell your Spotless Shares to Downer and
you will receive the Offer Price under the Offer. If you accept the Offer, you will be
unable to sell or transfer your Spotless Shares or accept any other offer for your
Spotless Shares, while the Offer is open.
What will happen
if a competing or
superior proposal
emerges?
The Independent Directors will carefully consider any competing or superior proposal
and will advise you whether the competing proposal affects their recommendation that
you accept the Offer.
However, the Independent Directors consider it unlikely that a superior proposal will
emerge, particularly as Downer and Downer Services already have a Relevant Interest
in approximately 99.6% of Spotless Shares.
Importantly, if you accept the Offer, you will be unable to withdraw your acceptance and
accept a superior proposal if one emerges, except in limited circumstances (which are
set out below and further in section 5.4).

page | 18

Question Answer
If I accept the
Offer, can I
withdraw my
acceptance?
No, unless the Takeovers Panel decides otherwise.
Can Downer
Services
withdraw the
Offer Once I have
accepted?
Downer Services may be able to withdraw the Offer if it obtains the written consent of
ASIC, subject to the conditions (if any) specified in such consent.
Can I accept the
Offer for only
some of my
Spotless Shares?
Yes.
What will happen
if Downer Service
increases its
Offer?
If you accept the Offer and Downer Services subsequently increases the Offer Price you
will receive the increased consideration for your Spotless Shares.

Will Spotless pay
a dividend as part
of the Offer?
No dividend is intended to be paid by Spotless in connection with the Offer.
When will I
receive the Offer
Price if I accept
the Offer?
If you accept the Offer, Downer will pay you the Offer Price to which you are entitled
under the terms of the Offer:
 in respect of the cash component of the Offer Price, within 7 days after the date
you validly accept the Offer; and
 in respect of the scrip component of the Offer Price, within 7 days of the end of
the Offer Period.
Will I need to pay
stamp duty if I
accept the Offer?
Section 9.6 of the Bidder’s Statement states that you will not pay stamp duty or goods
and services tax on a disposal of your shares or the grant of the Downer Contingent
Share Options. Stamp duty should not arise on the issue of Downer Shares on exercise
of the Downer Contingent Share Options provided at the time of the issue Downer is a
member of the Official List of the ASX, its shares are quoted on that exchange and less
than a 90% interest in Downer is acquired, either alone or together with associated
persons/related persons.
What are the tax
implications of
accepting the
Offer?
This depends on your personal tax position and the price and time at which you
originally acquired your Spotless Shares. A general outline of the tax implications of
accepting the Offer is set out in section 9 of the Bidder's Statement and section 9 of this
Target's Statement.
You should consult with your taxation adviser for detailed advice before making a
decision whether or not to accept the Offer.
Who should I call
if I have
questions?
If you have any further queries in relation to the Offer or how to accept the Offer, you
should call the Spotless Shareholder Information Line 1300 202 738 (within Australia) or
+61 1300 202 738 (outside Australia), Monday to Friday between 8.30am and 5.30pm
or go to www.spotless.com.

page | 19

4 Your choices as a Spotless Shareholder
Spotless encourages you to consider your personal risk profile, investment objectives and
tax and financial circumstances before making any decision in relation to your Spotless
Shares. As a Spotless Shareholder, you have the following three choices available to you
in relation to the Offer:
4.1 Option 1 – Accept the Offer
The Independent Directors recommend that you accept the Offer in the absence of a
superior proposal.
(a) How to accept the Offer
If you choose to accept the Offer, then your acceptance must be received by Downer
before the end of the Offer Period. The Offer Period ends on Monday, 21 September
2020, unless extended. Instructions on how to accept the Offer are set out in section 1 of
the Bidder's Statement, section 1.10 of Annexure A of the Bidder's Statement and on the
Acceptance Form accompanying the Bidder's Statement. If you want to accept the Offer,
you should follow these instructions carefully to ensure that your acceptance is valid.
(b) Effect of acceptance
If you accept the Offer you will be entitled to be paid the Offer Price by Downer Services
in accordance with the terms of the Offer (see Annexure A of the Bidder's Statement for
further information on timing of payment of the Offer Price).
The effect of acceptance of the Offer is explained in more detail in section 7 of the
Bidder’s Statement and sections 1.12 and 1.13 of Annexure A of the Bidder's Statement.
You should read those provisions in full to understand the effect that acceptance will have
on your ability to exercise the rights attaching to your Spotless Shares and the
representations and warranties that you are deemed by Downer Services to give to it by
accepting the Offer.
It is worth noting that accepting the Offer would (subject to the possible withdrawal rights
set out in section 5.4 of this Target’s Statement):
− prevent you from participating in any competing superior proposal that may
emerge; and
− prevent you from otherwise selling your Spotless Shares.
The taxation implications of accepting the Offer depend on a number of factors and will
vary according to your particular circumstances. A general outline of the Australian tax
consequences of accepting the Offer is set out in section 9 of this Target’s Statement and
section 9 of the Bidder's Statement. You should seek your own specific professional
advice regarding the taxation consequences for you in accepting the Offer.

page | 20

4.2 Option 2 – Sell your Spotless Shares
During a takeover, shareholders in a target company may still sell their shares for cash
provided that they have not accepted a takeover offer for those shares. Accordingly,
Spotless Shareholders remain free to sell their Spotless Shares, provided they have not
already accepted the Offer. However, as Spotless is no longer listed on the ASX, this may
be difficult .
Spotless Shareholders who sell their Spotless Shares other than via the Offer:
− will lose the ability to accept the Offer, or to participate in any other superior
proposal that may emerge;
− may receive more or less for their Spotless Shares than the consideration under
the Offer of $1.00 cash per Spotless Share plus the Downer Contingent Share
Options; and
− may incur a brokerage charge.
Spotless Shareholders who wish to sell their Spotless Shares other than via the Offer
should contact their stockbroker or financial adviser for instructions on how to effect that
sale.
The taxation implications of selling your Spotless Shares other than via the Offer depend
on a number of factors and will vary according to your particular circumstances, in the
same way as if you accept the Offer. You should seek your own specific professional
advice regarding the taxation consequences for you of selling your Spotless Shares.

4.3 Option 3 – Reject the Offer by doing nothing
If you do not wish to accept the Offer and wish to retain your Spotless Shares, you do not
need to take any action.
Downer Services is now entitled to compulsorily acquire your Spotless Shares under the
Corporations Act (and has lodged a Compulsory Acquisition Notice with ASIC to
commence the compulsory acquisition process). If this compulsory acquisition process
proceeds, you will receive your consideration later than Spotless Shareholders who
choose to accept the Offer. Please refer to section 5.5 of this Target’s Statement for
further details on compulsory acquisition. Please also see section 1 of the Supplementary
Bidder’s Statement.
If you successfully challenge the compulsory acquisition process (and Downer does not
subsequently make a successful offer with revised consideration), you will remain a
minority shareholder in Spotless, with potential adverse implications, including that it will
be difficult for you to sell your Spotless Shares.

page | 21

5 Important information about the Offer
5.1 Summary of the Offer
The Offer Price is $1.00 cash per Spotless Share plus such number of Downer
Contingent Share Options calculated in accordance with the terms of the Offer.
5.2 Offer Period
The Offer opened for acceptance from Thursday, 20 August 2020 and will remain open
for acceptance until 7:00pm (AEST) on Monday, 21 September, unless extended or
withdrawn. The circumstances in which Downer Services may extend or withdraw the
Offer are set out in section 1.23 of Annexure A of the Bidder's Statement.
5.3 Withdrawal of Offer
Downer Services may not withdraw the Offer if you have already accepted it.
Before you accept the Offer, Downer Services may withdraw offers made in respect of the
Offer only with the written consent of ASIC and subject to the conditions (if any) specified
in such consent.
5.4 Effect of acceptance and your ability to withdraw your acceptance
Spotless Shareholders who accept the Offer give up their rights to sell or otherwise deal
with their Spotless Shares, unless the above withdrawal rights are exercised.
5.5 Effect of Downer lodging the Compulsory Acquisition Notice
By lodging the Compulsory Acquisition Notice with ASIC and issuing it to Spotless
Shareholders, Downer has commenced the process of compulsory acquisition under the
Corporations Act. See section 1 of the Supplementary Bidder’s Statement for further
detail.
(a) Follow on compulsory acquisition
Under Part 6A.1 of the Corporations Act, if, at any point during the Offer Period, Downer
Services has (together with its associates):
− a Relevant Interest in at least 90% (by number) of Spotless Shares; and
− acquired at least 75% (by number) of Spotless Shares in which Downer Services or
its associates did not have a Relevant Interest as at 12 August 2020,
then Downer Services will be entitled to compulsorily acquire any outstanding Spotless
Shares for which it did not receive acceptances, on the same terms as the Offer. Downer
must also offer to buy out remaining Spotless Shares held by Spotless Shareholders as
Downer (and its associates) have a Relevant Interest in at least 90% of Spotless Shares
(by number) at the end of the Offer Period.
Coltrane has already accepted the Offer in respect of is entire shareholding which has
resulted in Downer obtaining greater than 75% (by number) of the outstanding Spotless
Shares and a Relevant Interest in approximately 99.6% (by number) of the total number
of Spotless Shares.

page | 22

Downer Services lodged its Compulsory Acquisition Notice with ASIC and sent it to
Spotless Shareholders on 25 August 2020. Under Part 6A.1 of the Corporations Act,
Downer must give one month notice of compulsory acquisition, following which Downer
has two weeks to complete the compulsory acquisition. Subject to any extensions
required under the provisions of the Corporations Act, completion of the compulsory
acquisition of Spotless Shares is currently expected to occur on or around 29 September
2020. See section 1 of the Supplementary Bidder’s Statement for further information.
Spotless Shareholders should be aware that if they do not accept the Offer and their
Spotless Shares are compulsorily acquired, those Spotless Shareholders will face a delay
in receiving the Offer Price compared with Spotless Shareholders who have accepted the
Offer (who will receive the cash consideration within 7 days of accepting the Offer).
However, these Spotless Shareholders will be paid the same consideration under the
Offer.
Spotless Shareholders have statutory rights to challenge the compulsory acquisition of
their Spotless Shares, but a successful challenge will require the relevant Spotless
Shareholder to establish to the satisfaction of a court that the terms of the Offer do not
represent "fair value".
(b) Obtaining names and addresses of other holders
Spotless Shareholders may at any time before 25 September 2020 (being one month
from when the Compulsory Acquisition Notice was lodged with ASIC) request Downer
provide a written statement with the names and addresses of everyone to whom Downer
issued the Compulsory Acquisition Notice. Downer Services must provide that statement
within 7 days after the request.
(c) Objecting to the compulsory acquisition process
If any Spotless Shareholder wishes to prevent the compulsory acquisition process in
respect of its Spotless Shares, that shareholder must apply to the court under Part 6A.1
of the Corporations Act. A successful challenge will require the relevant Spotless
Shareholders to establish to the satisfaction of a court that the consideration offered is
not "fair value".
Any application must be made before the later of:
− one month from when the Spotless Shareholder was notified of the compulsory
acquisition by way of the Compulsory Acquisition Notice, which will be on 25
September 2020; or
− the end of 14 days from when the Spotless Shareholder requests the written
statement of names and addresses from Downer.
5.6 When you will receive the Offer Price
If you accept the Offer, Downer will pay you the Offer Price to which you are entitled:
− in respect of the cash component of the Offer Price, within 7 days after the date
you validly accept the Offer; and
− in respect of the scrip component of the Offer Price, within 7 days of the end of the
Offer Period.

page | 23

6 Information relating to Spotless
6.1 Overview of Spotless
Spotless is the largest integrated facilities services provider throughout Australia and New
Zealand. It provides essential services and solutions for every day operations and
services across various sectors and industries in Australia and New Zealand.
The essential services and solutions include outsourced facility services, laundry and
linen services, technical and engineering services, maintenance and asset management
services and refrigeration solutions.
Spotless employs over 20,478 people across 50 offices comprised of full-time, part-time
and casual employees. Spotless provides more than 100 integrated services and delivers
solutions for over 4,182 contracts.
6.2 Corporate History
Spotless has origins dating back to 1946 and was listed on the Australian Securities
Exchange between 2014 and 2019.
On 21 March 2017, Downer Services made an off-market, takeover offer for Spotless
Shares. This offer closed on 28 August 2017 at which point Downer held a Relevant
Interest in approximately 87.80% of Spotless Shares.
Spotless was subsequently de-listed from the ASX at the close of trading on 30 August
2019. Spotless is currently a majority owned and controlled subsidiary of Downer.
Spotless is currently an unlisted, public company and is subject to the periodic and
continuous disclosure requirements of the Corporations Act.
6.3 Business activities
The principal business activities of Spotless and its subsidiaries are the provision of
outsourced facility services, laundry and linen services, technical and engineering
services, maintenance and asset management services and refrigeration solutions to
various industries in Australian and New Zealand.
Spotless’ eight core lines of business include:
(a) “Health and Education (H&E)” covering integrated facilities management and
specialist operation support to health and education precincts;
(b) “Government & Citizen Services (G&CS)” covering hard and soft maintenance and
services for government facilities and assets;
(c) “Defence” covering integrated facilities management and the delivery of project
works for defence estates;
(d) “Asset & Development Services (A&DS)” covering mechanical and electrical and
HVAC (heating, ventilation and air conditioning) services and integrated hard
facilities management services to industrial customers;

page | 24

(e) “Hospitality” covering catering services to private customers across stadia, tourism,
corporate and education sectors;
(f) “Laundries” covering linen and garment laundry services provided to social
infrastructure, industry and accommodation customers;
(g) “New Zealand” covering the management of contracts in the Laundries, Hospitality
and Defence sector; and
(h) “Utilities” covering the design, construction and maintenance of utility networks.
See section 3.1 and section 3.3 of the Independent Expert’s Report for further detail.
6.4 Spotless business and assets in the event that the Offer is not successful
On 21 July 2020 Downer, as the majority owner of Spotless, announced the following
changes affecting the business and assets of Spotless. As set out in Section 6.2 of the
Bidder’s Statement, Downer has indicated that it would intend to pursue the following
changes whether or not Spotless becomes a wholly owned subsidiary pursuant to the
Offer.
The changes below are extracted from the Bidder’s Statement.
I. “Disposal of Laundry businesses
The exit of Spotless' Laundries business remains a key objective. The Laundries
business includes the rental, cleaning, collection, delivery and stock management of
linen, uniforms and specialised workwear, with 13 commercial laundries servicing 3,500
clients across Australia and New Zealand and processing over 117,000 tonnes of laundry
every year.
The Laundries business sale process has been paused and will resume when investment
market conditions improve.”
II. “Review of Hospitality business
The Hospitality business includes services such as operating canteens, dining halls and
restaurants, personal meal delivery, specialised food preparation and delivery and
management of food and beverage facilities. The Hospitality business provides services
across business and industry, functions, special events, stadia and retail in Australia and
New Zealand.
In Australia, Spotless’ Hospitality business has been generating virtually no revenue since
COVID-19 regulations were introduced in March 2020. As a result, Downer reduced the
size of this business in June 2020 to reflect the smaller scale of operations.
Downer is reviewing the prospects of Spotless' Hospitality business to determine which
parts of the business or contracts will continue, be run off or sold as the future market
demand becomes clearer.
In Hospitality all non-critical staff have been stood down or made redundant. Contracts
have been temporarily discontinued, not renewed or converted to cost plus a margin.”

page | 25

III. “Run off of higher risk construction projects
A move away from higher-risk construction projects in Spotless’ Infrastructure and
Construction business (I&C) is underway and will complete as existing projects finish.
This will minimise Spotless’ exposure in high risk projects, particularly vertical commercial
construction, with increased focus on opportunities that better matches I&C’s capabilities
and Downer Group’s risk appetite. As a result, the I&C business in Spotless will focus on
longer-term maintenance contracts and smaller scale construction.”
6.5 Details of Spotless Directors
The IBC comprises of John Humphrey (Non-Executive Director and Chairman) and
Simon McKeon (Non-Executive Director). The other Directors of Spotless are Grant Fenn,
Peter Tompkins and Michael Ferguson.
Details of each of Spotless’ Directors is as follows:
John Humphrey
Chairman and Non-Executive Director
LLB
John was appointed a Non-Executive Director in July 2017 and appointed Chairman on
24 August 2017. He is also the Chairman of the People and Remuneration Committee
and a member of the Audit, Business Risk and Compliance Committee.
He served as an independent Non-Executive Director at Downer between 2001 and
2016. He is currently a Legal Consultant to King & Wood Mallesons. John is also
currently a Director at Lynas Corporation Ltd and the Chairman of Auswide Bank Limited.
He is a former member of the Australian Takeovers Panel and was the Executive Dean of
the Faculty of Law at Queensland University of Technology from 2013 to 2019.
Simon McKeon AO
Non-Executive Director
BCom, LLB, DPH, FAICD
Simon was appointed a Non-Executive Director in December 2016. He is Chairman of the
Audit, Business Risk and Compliance Committee and a member of the People and
Remuneration Committee.
He is currently Chancellor of Monash University and a non-executive director of Rio Tinto
and National Australia Bank Limited, was Australian of the Year in 2011 and was made
an Officer of the Order of Australia in 2012 for distinguished services to business,
commerce and the community. Simon has extensive experience in senior leadership and
Board roles across a broad range of industries and sectors; this includes having served
as Executive Chairman of Macquarie Group Melbourne as well as Chairman of AMP
Limited, CSIRO and MYOB Group Limited and as the Founding President of the
Australian Takeovers Panel.
During his over 35 years at Macquarie Group, Simon specialised in corporate mergers
and acquisitions, fund raising and strategic advice. He continues to be retained as a
consultant by Macquarie. Prior to this, he practiced as a lawyer with Blake Dawson
Waldron in Sydney.

page | 26

Simon is an active philanthropist and has been a significant contributor over many years
to charitable, educational, public health and other community-based organisations and
causes.
Simon is presently Chairman of South East Melbourne, Summer Housing and the
Australian Industry Energy Transitions Initiative. He is an Australia Day Ambassador for
the Victorian Government and also serves on the Advisory Boards of The Big Issue and
InfraBuild.
Grant Anthony Fenn
Non-Executive Director
BEc, CA
Grant was appointed a Non-Executive Director in December 2017.
Grant has over 30 years’ experience in operational management, strategic development
and financial management. He joined Downer in October 2009 as Chief Financial Officer
and was appointed Chief Executive Officer in July 2010.
He was previously a Member of the Qantas Executive Committee, holding a number of
senior roles over 14 years, as well as Chairman of Star Track Express and a Director of
Australian Air Express. He worked at KPMG for eight years before he joined Qantas.
Grant is currently a Director of Sydney Airport Limited and a Member of the UTS
Engineering and IT Industry Advisory Board.
Grant holds a Bachelor of Economics from Macquarie University and is a member of the
Australian Institute of Chartered Accountants.
Peter Tompkins
Chief Executive Officer and Managing Director
BCom, LLB
Peter was appointed Chief Executive Officer and Managing Director in October 2018.
Prior to this appointment, Peter held the role of the Group General Counsel and Company
Secretary of Downer Group for seven years, where he was a key member of the
Executive Committee and Tenders and Contracts Committee.
Peter also represented Downer Group on numerous joint venture and Public Private
Partnership Boards, including Keolis Downer, Evolution Rail and Reliance Rail.
Michael Ferguson
Non-Executive Director
BCom, CA
Michael was appointed a Non-Executive Director in July 2017. He is also a member of the
Audit, Business Risk and Compliance Committee.
He is the Chief Financial Officer at Downer Group and leads its financial reporting, tax,
treasury, shared service, IT, M&A and risk management activities. Michael has held a
range of senior finance positions in a career spanning 25 years. He was previously VP
Finance for ASX listed explosives group Dyno Nobel and more recently held a number of
portfolio CFO positions for a large private equity fund.

page | 27

6.6 Financial results
(a) Financial Position of Spotless Group
On the 12 August 2020, Spotless released its 2020 Annual Report for the year ended 30
June 2020. An extract of key balance sheet metrics from Spotless’ audited Consolidated
Statement of Financial Position as at 30 June 2020 is set out below:
Key Balance Sheet Metrics As at 30 June 2020
2

$m
Current Assets 563.9
Non-Current Assets 1,507.7
‒ Goodwill 774.0
‒ PP&E, Right of use assets and Other 733.7
Current Liabilities 738.3
Non-Current Liabilities 1,034.7
Net Current (Liabilities) / Assets (174.4)
Net Assets 298.6
Net Debt
1
654.4

Notes:
1. Excludes deferred borrowing costs, and lease liabilities (refer to note 2 below).
2. Spotless Group elected to apply AASB 16 from 1 July 2019. Upon transition to AASB
16, Spotless Group recognised Right of use assets of $155.9 million and lease
liabilities of $194.4 million as at 1 July 2019.
Further details can be found in Spotless’ 2020 Annual Report.
(b) Historical Financial Performance of Spotless Group
An extract of Spotless’ Consolidated Statement of Profit or Loss and Other
Comprehensive Income for the year ended 30 June 2019 and 30 June 2020 is shown in
the following table:

page | 28

Year Ended
30 June 2020
$m
Year Ended
30 June 2019
$m
Change
%
Sales Revenue
1
3,038.2 3,025.1 0.4
Profit before depreciation,
amortisation, finance costs and
income tax (EBITDA)


73.2


249.5


(70.7)
(Loss) / Profit before finance costs
and income tax (EBIT)
2


(39.1)

159.0

> (100)
(Loss) / Profit before income tax (75.5) 119.8 > (100)
(Loss) / Profit after income tax
3
(53.1) 84.0 > (100)

Notes:
1. Sales Revenue of $3,038.2 million, up 0.4% from the prior corresponding period,
reflecting increased project volumes within Government and Defence businesses,
partially offset by COVID-19 pandemic impacts on the Hospitality, New Zealand and
Laundries businesses.
2. EBIT loss of $39.1 million, reflects a decrease of $198.1 million from the prior year
driven by the impact of $141.1 million of individually significant items recorded as a
result of:
a. Portfolio Restructure and Exit Costs
Portfolio restructure and exit costs of $64.1 million (after tax) represents
restructuring costs incurred following management decision to scale back the
Spotless Group’s construction service offerings and the exit from the
Resources sector, as well as cost associated in right sizing the business to
reflect a new operating model and remain competitive in a post COVID-19
environment.
b. Payroll Remediation Costs
Payroll remediation costs of $11.8 million (after tax) reflect the costs incurred
in relation to the Spotless Group’s assessment to confirm compliance with its
Modern Awards and EBAs and ensure employees have been paid
appropriately.
c. Legal settlement expenses
Legal settlement costs of $23.8 million (after tax) represent the excess cost
over the insurance cover, following the acceptance of the offer to settle the
shareholder claim action commenced against Spotless in the Federal Court
of Australia in May 2017. The settlement was without admission of liability,
and includes interest and cost to the Applicant. This claim has been
previously disclosed as a contingent liability.

page | 29

3. Loss after tax of $53.1 million decreased from FY19 profit by $137.1 million due to
the impact of the above mentioned individually significant items ($99.7 million after
tax) on the current period comprising portfolio restructure and exit costs ($64.1
million), payroll remediation costs ($11.8 million) and legal settlement expenses
($23.8 million).
Spotless Group financial reports, including the 2020 Annual Report, are available on the
Company’s website at www.spotless.com
.

page | 30

7 Information relating to Downer
Downer is a public company incorporated in Australia which is listed on ASX (ASX Code: DOW)
with a secondary listing as an overseas listed issuer on NZX. The market capitalisation of
Downer as at the date of this Target’s Statement is approximately A$3.1 billion.
Downer is a leading provider of integrated services in Australia and New Zealand. Downer
employs approximately 52,000 people, mostly in Australia and New Zealand but also in the
Asia-Pacific region, South America and Southern Africa.
Refer to Section 4 of the Bidder’s Statement or Downer’s website (www.downergroup.com) for
further information about Downer. Information on Downer is also set out in section 1.2 of the
Independent Expert’s Report, which contained in this Target’s Statement as Attachment A.

page | 31

8 Risk factors
8.1 Risks associated with accepting the Offer
(a) Possibility of a superior proposal emerging
If you accept the Offer, you will forego the opportunity to benefit from any superior
proposal by another party for your Spotless Shares should such a proposal eventuate.
As at the date of this Target's Statement, the Independent Directors are not aware of a
proposal by anyone to make a superior proposal. In light of Downer’s Relevant Interest in
approximately 99.6% of Spotless Shares, the Independent Directors consider that it is
unlikely that a superior proposal will be forthcoming before the end of the Offer Period.
Similarly, the Independent Expert's Report states that, an alternative takeover offer is unlikely
as any such offer would require Downer to sell its shares which it considers to be unlikely. On
this basis, Spotless Shareholders not associated with Downer are unlikely to receive a superior
offer.
(b) You will not be able to challenge the compulsory acquisition process
You are entitled to apply to the court under section 661E of the Corporations Act for an
order that your Spotless Shares not be compulsorily acquired. The application will be
successful if the court is satisfied that the consideration (comprising the cash component
and the Downer Contingent Share Options component) is not “fair value” for your
Spotless Shares. If the court makes such an order, your Spotless Shares will not be
compulsorily acquired as part of the current process, and Downer may make a further
offer for your Spotless Shares, or commence a further compulsory acquisition process,
with revised consideration.
If you accept the Offer, you will not be eligible to make an application to the court to
challenge the compulsory acquisition process, and if successful, you will not benefit in
any possible revised offer for, or compulsory acquisition process in respect of, your
Spotless Shares which Downer may make or undertake.
See sections 2.2 and 5.5 of this Target’s Statement for further information.
Although it is a separate process Spotless Shareholders should understand that the
Independent Expert has determined the Offer to be fair and reasonable for Spotless
Shareholders not associated with Downer.
(c) Possibility the Downer Contingent Share Options will not convert into
Downer Shares
The Downer Contingent Share Options are subject to certain vesting conditions. If the
market price of Downer Shares does not reach certain “target price conditions” within four
years then the options will lapse and Spotless Shareholders will have no entitlement to
Downer Shares. Further, the Downer Contingent Share Options are split into three
tranches with escalating “target price conditions”. There is therefore no guarantee that
some or all of your Downer Contingent Share Options will convert into Downer Shares.
(d) Risks associated with becoming a Downer Shareholder on conversion of the
Downer Contingent Share Options

page | 32

If the “target price conditions” and other conditions associated with the Downer
Contingent Share Options are satisfied you will be issued Downer Shares. There are
certain risks you may face as an investor in Downer. See section 7.2 of the Bidder’s
Statement for further information on these risk factors.
(e) Risks associated with a takeover offer being made for Downer
The terms of the Downer Contingent Share Options do not expressly provide for their
treatment in the event of a takeover bid for Downer.
The Downer Contingent Share Options are exercisable when the relevant target price
condition for each tranche of Downer Contingent Share Options is met or exceeded. If a
takeover bid for Downer was to result in the 5-day VWAP for Downer shares satisfying
the relevant target price condition attached to each tranche of Downer Contingent Share
Options, then the relevant Downer Contingent Share Options would be become
exercisable in accordance with their terms.
If the relevant target price condition is not satisfied, the Downer Contingent Share Options
would continue in accordance with their terms. Those terms do not expressly provide for
the treatment of the Downer Contingent Share Options in the event that Downer shares
cease to be traded on ASX. Given this, there is a risk that such circumstances may result
in a loss (including a total loss) of value of the Downer Contingent Share Options, or that
holders of the Downer Contingent Share Options may need to take action (including,
potentially, court or Takeovers Panel proceedings) to seek to realise value for their
Downer Contingent Share Options.”
See Annexure B of the Bidder’s Statement for the full terms of the Downer Contingent
Share Options.
8.2 Risks associated with rejecting the Offer, challenging the current compulsory
acquisition process and continuing as a Spotless Shareholder
Notwithstanding that Downer has commenced the compulsory acquisition process, there
are very limited circumstances in which you could continue as a Spotless Shareholder.
This would require you to not accept the Offer, to successfully challenge the current
compulsory acquisition process, and Downer not to commence a further compulsory
acquisition process.
Therefore, in considering this Target's Statement and the Offer, you should be aware that
there are a number of risks which may affect the future operating and financial
performance of Spotless if you were to continue as a Spotless Shareholder.
Spotless Shareholders should carefully consider and evaluate Spotless and its business
and whether they should continue to hold Spotless Shares, having regard to their own
investment objectives and financial circumstances and taking into consideration the
material risk factors, as set out below. Spotless Shareholders should examine the full
content of this Target's Statement and may wish to consult their financial or other
advisers before deciding whether or not to accept the Offer.
The risk factors set out below are not exhaustive. Additional risks of which Spotless is
unaware or that Spotless currently considers to be immaterial also have the potential to
have a material adverse effect on the business, financial condition and operating and
financial performance of Spotless.

page | 33

(a) Spotless may fail to renew existing contracts or win new contracts
Spotless’ ability to renew contracts with existing customers and win new contracts with
existing and new customers is fundamental to its business, growth and profitability. These
contracts are usually subject to a competitive process, and there is a risk that Spotless
may not win these contracts, which could negatively impact Spotless’ financial
performance.
(b) Commencement of new contracts
Commencement of Spotless’ customer contracts can be delayed for various reasons.
Such delays may result in a delay in Spotless receiving revenue or may cause Spotless
to incur additional costs, which could have an adverse impact on Spotless’ financial
performance.
(c) Ability to understand customer requirements or cost inputs
For a variety of reasons, Spotless may from time to time enter into contracts where
agreed revenue is insufficient to cover Spotless’ costs of delivering the services or to
provide adequate profit margins. If Spotless enters into low margin contracts, its financial
performance could be adversely impacted. Although this risk is limited with the
implementation of strict governance processes.
(d) Contract termination, renegotiation or price resets
Early termination of Spotless’ services or the failure to renew contracts for Spotless’
services will reduce Spotless’ future revenue and may leave Spotless with excess
capacity or redundancy costs (for which Spotless may not receive adequate (or any)
compensation).
Customers may also seek to renegotiate existing contracts for various reasons during the
contract term. Spotless’ financial performance could be adversely impacted if
renegotiations of contracts are on terms less favourable to Spotless or if the parties fail to
reach agreement.
Certain public-private partnership contracts provide for periodic re-setting of the price paid
for services. If the parties fail to reach agreement on such price resets and there is a
subsequent curtailment of services, Spotless’ financial performance may be impacted.
(e) Possibility of customers changing to in-sourcing of services
Spotless’ financial performance and growth depends on continued demand for its
services. A decline in outsourcing or an increase in customers taking services back in-
house may adversely affect Spotless’ financial performance or growth prospects.
(f) Ability to attract and retain key personnel
Spotless’ performance is dependent on the ability of its senior executives and other key
personnel to manage and grow its business and respond to customers’ needs. The loss
of such personnel, or an inability to attract replacement or additional key personnel, could
have a material adverse effect on Spotless’ operating and financial performance.

page | 34

(g) Ability to manage large workforce
Spotless manages a large and diverse workforce to deliver outsourced services to its
customers. Spotless’ service quality is largely dependent on Spotless’ ability to attract,
develop, manage, motivate and retain its workforce.
A high level of key staff turnover reduces operational efficiency, impairs knowledge
management and leads to excessive recruitment costs.
Many of Spotless’ employees are represented by a union or are otherwise employed
under awards or union-negotiated Enterprise Agreements. The negotiation of new
Enterprise Agreements or changes to awards from time to time may increase the overall
costs of running Spotless’ business and such increased costs may not be able to be
passed through to customers in full.
If employees take industrial action, Spotless could be exposed to loss to the extent the
industrial action impairs Spotless’ ability to provide services or causes disruption to
Spotless’ customers and Spotless is not adequately protected under the relevant
contract.
(h) Disruption due to the effects of COVID-19
As Spotless Shareholders are aware, numerous industries and the Australian economy
as a whole has been affected by the effects of COVID-19, including a number of
industries which Spotless provides services to. Spotless is not listed on the ASX and is
not directly impacted by the share market volatility resulting from COVID-19. However,
the effects of COVID-19 may impact Spotless’ supply chain, ability to deploy its workforce
and maintain its contracting base.
(i) Disruption to Spotless’ external suppliers
Spotless has various supply relationships necessary for the operation of its business. Any
disruption to the supply chain could adversely impact Spotless’ operating and financial
performance.
Inadequate or inefficient management of subcontractors could also result in damage to
Spotless’ reputation, or cause Spotless to be in breach of its customer contracts, which
could adversely impact Spotless’ operating and financial performance.
(j) Rising input costs may lead to lower profitability
The profitability of Spotless’ contracts depends on its management of costs. A significant
or sustained increase in input costs to which Spotless is unable to respond adequately, or
at all, either through cost reduction measures or contract price increases, could have an
adverse effect on the financial performance of the business and the ability of the
business.
(k) Regulatory non-compliance
Spotless is subject to a number of laws and regulations, including those relating to
workplace health and safety, as well as the handling, preparation and serving of food, the
cleanliness of food production facilities and the responsible service of alcohol. Additional
or amended laws and regulations may increase the cost of compliance, adversely impact
Spotless’ ability to comply, or expose Spotless to greater potential liabilities.

page | 35

A failure by Spotless to comply with applicable laws and regulations may adversely
impact on Spotless’ business and financial performance.
(l) Environmental regulation non-compliance
Spotless is required to run its operations in compliance with legislation concerning the
protection of the environment. In particular, certain chemicals have contaminated soil and
groundwater at some of Spotless’ laundry sites due to historical use of those sites.
Spotless is presently assessing, managing and remediating the contamination caused by
such events and may in the future be required to undertake additional environmental
management and remediation activities.
Costs may be incurred in connection with actual or alleged violations arising under any
environmental laws, including fines, damages and criminal or civil sanctions, or
interruptions to operations.
(m) Failure of key IT systems
Spotless relies on a variety of IT systems in the operation of its business. If these
systems fail, or if those employees with the skills to operate those systems leave, it may
be difficult to hire suitably qualified personnel and the business may suffer as a result.
(n) Failure to manage working capital may negatively impact Spotless’ business
At any point in time, Spotless may hold a significant level of trade receivables, and is
therefore exposed to credit risk (although bad debts are rare).
While this risk is limited as a result of the diversity of its customer base, an economic
downturn could affect the solvency of customers, which in turn could adversely affect
Spotless’ financial performance.
Similarly, Spotless must ensure that it manages its trade payables appropriately. Any
misalignment between the movement in receivables and payables could significantly
impact Spotless’ cash position.
(o) Failure to maintain financing in the current environment
As set out in the Independent Expert’s Report, Spotless has substantial levels of debt and
any further negative impacts on Spotless’ earnings without negotiating a corresponding
increase to its leverage ratio may breach covenants.
See page 5 of the Independent’s Expert Report for further information.
(p) Foreign exchange rate risk
In FY2020, 11.17% of Spotless’ sales revenue was earned in New Zealand dollars.
Changes in the Australian and New Zealand dollar exchange rate may adversely impact
on Spotless’ revenue and balance sheet valuations.
While Spotless may implement currency hedging policies, the Australian dollar value of
both its net debt and operating profits may fluctuate as exchange rates vary and, in any
case, such hedging may not be effective.

page | 36

(q) Permits, licences, accreditations and certifications
Spotless is required to hold certain operating permits, licences, accreditations and
certifications. Loss of, failure to comply with or failure to hold such required permits,
licences, accreditations and certifications may directly impact Spotless’ ability to fulfil its
contractual obligations and adversely affect profitability.

page | 37

9 Taxation considerations
This section 9 provides a summary of the general Australian tax consequences for
Spotless Shareholders in relation to the Offer and should be considered in conjunction
with the rest of the Target’s Statement.
The information is a general guide and is not intended to be an authoritative or complete
statement of the Australian tax law applicable to the specific circumstances of each
Spotless Shareholder and should not be relied upon by Spotless Shareholders as tax
advice. Spotless Shareholders are strongly advised to seek their own professional advice
with respect to the tax implications of the Offer.
9.1 Overview
The following is a general summary of the Australian tax (including capital gains tax
(CGT), goods and services tax (GST) and stamp duty) implications for Spotless
Shareholders who hold their Spotless Shares on capital account and who dispose of their
Spotless Shares under the Offer.
This summary does not apply to Spotless Shareholders who:
 hold their Spotless Shares as revenue assets, as trading stock, or are subject to
the Taxation of Financial Arrangements provisions in Division 230 of the Income
Tax Assessment Act 1997;
 are financial institutions, insurance companies, partnerships, tax exempt
organisations, dealers in securities, shareholders who changed their tax residency
while holding their Spotless Shares, or non-resident shareholders who own their
Spotless Shares through a permanent establishment in Australia, each of which
may be subject to specific additional tax rules;
 acquired their Spotless Shares as part of employee share arrangements; or
 have their Spotless Shares compulsorily acquired under Part 6A.2 of the
Corporations Act.
The summary has been prepared on the basis of Australian taxation law and
administrative practice as at the date of the Target’s Statement.
References to Australian resident Spotless Shareholders are to Spotless Shareholders
who are residents of Australia for Australian income tax purposes and are not tax resident
in any other jurisdiction.
9.2 Australian tax implications of the Offer
(a) Disposal of Spotless Shares by Australian resident shareholders
(i) Australian capital gains tax
The disposal of Spotless Shares by an Australian resident Spotless
Shareholder should constitute CGT event A1 for Australian income tax
purposes.
Australian resident Spotless Shareholders should:

page | 38

 make a capital gain if the capital proceeds from the disposal of their
Spotless Shares are greater than the cost base of their Spotless
Shares; or
 make a capital loss if the capital proceeds from the disposal of their
Spotless Shares are less than the reduced cost base of their Spotless
Shares.
Australian resident Spotless Shareholders who make a capital gain on
disposal of their Spotless Shares will be required to include the net capital
gain (if any) for the income year in their assessable income. No CGT roll-
overs should be applicable to the Offer.
Australian resident Spotless Shareholders who make a capital loss on the
disposal of their Spotless Shares can only offset the capital losses against
capital gains realised in the same or subsequent income years. Specific loss
recoupment rules apply to companies and may restrict their ability to utilise
capital losses in a future period.
(ii) Time of CGT event
CGT event A1 occurs when there is a change in beneficial ownership of
Spotless Shares. The time of the CGT event is:
 when an Australian resident Spotless Shareholder enters into the
contract to dispose of their Spotless Shares; or
 where their Spotless Shares are compulsorily acquired, when Downer
Services becomes the beneficial owner of their Spotless Shares.
(iii) Capital proceeds
The capital proceeds from the disposal of Spotless Shares under the Offer
should include $1.00 cash for each Spotless Share, and the market value of
the Downer Contingent Share Options received at the time of the CGT
event.
(iv) Cost base
The cost base and reduced cost base of Spotless Shares should generally
include the amount paid to acquire the Spotless Shares, the market value of
any property given to acquire the Spotless Shares and any incidental costs
of acquisition.
(v) CGT discount
Generally, Australian resident Spotless Shareholders who are individuals,
trusts, or complying superannuation funds that have held their Spotless
Shares for at least 12 months at the time of their disposal should be entitled
to the CGT discount in calculating the amount of the capital gain on disposal
of their Spotless Shares.
The CGT discount is applied after available capital losses have been offset
to reduce the capital gain.

page | 39

The applicable CGT discount which should reduce a capital gain arising from
the disposal of Spotless Shares is as follows:
 50% for individuals and trusts; or
 33
1
3
�
% for a complying superannuation fund.
The CGT discount is not available for Australian resident Spotless
Shareholders who are companies.
(b) Acquisition of Downer Contingent Share Options by Australian residents
The receipt of Downer Contingent Share Options should not give rise any further CGT
event to an Australian resident Spotless Shareholder.
The cost base (and reduced cost base) of a Downer Contingent Share Option should
reflect the market value of the property given by the Australian resident Spotless
Shareholder as consideration for the Downer Contingent Share Option. The property
given by an Australian resident Spotless Shareholder is their Spotless Shares. The cost
base (and reduced cost base) of the Downer Contingent Share Options received should
be the difference between the market value of the Spotless Shares at the time of disposal
less the $1.00 cash received per Spotless Share.
(c) Exercise or cancellation of Downer Contingent Share Options by Australian
residents
If the Downer Contingent Share Options are exercised and Australian resident Spotless
Shareholders receive Downer Shares:
 the Downer Contingent Share Options will cease to exist. Whilst this should
represent a CGT event, no capital gain or loss should arise to Australian resident
Spotless Shareholders;
 the first element of the cost base (and reduced cost base) of the Downer Shares
should be equal to the cost base (and reduced cost base) of the Downer
Contingent Share Options (refer above);
 the Downer shares should be taken to have been acquired at the time of exercise
of the Downer Contingent Share Options.
The disposal of any Downer Shares received on exercise of the Downer Contingent
Share Options by an Australian resident Spotless Shareholder should give rise to CGT
event A1. Australian resident Spotless Shareholders should:
 make a capital gain if the capital proceeds from the disposal of their Downer
Shares are greater than the cost base of their Downer Shares; or
 make a capital loss if the capital proceeds from the disposal of their Downer
Shares are less than the reduced cost base of their Downer Shares.
If some or all of the Downer Contingent Share Options are not exercised, the Downer
Contingent Share Options will lapse, and a CGT event should occur. Australian resident
Spotless Shareholders should incur a capital loss on the basis that their reduced cost
base in the Downer Contingent Share Options should exceed any capital proceeds on the
Downer Contingent Share Options lapsing.

page | 40

(d) Example
Dan owns 100,000 Spotless Shares. The total cost base of Dan’s Spotless Shares is
$105,000.
Dan’s total consideration under the Offer is as follows:
 Cash – A$100,000 (being $1.00 per Spotless Share)
 Downer Contingent Share Options received – 5,578 (being 1 Downer Contingent
Share Option per 17.92741 Spotless Shares). For the purposes of this example,
the assumed market value per Spotless Share is $0.09315 (based on the mid point
of the value of one Downer Contingent Share Option of $1.27 - $2.07 (refer section
5.4 of Independent Experts Report)) equating to $9,315 for Dan’s Spotless Shares
Dan’s capital gain equals $4,315 (capital proceeds of $109,315 less cost base of
$105,000). Assuming Dan has no available capital losses, Dan’s discount capital gain is
$2,157.50 (50% of $4,315).
Dan’s holds the following Downer Contingent Share Options:
Tranche
Downer Contingent
Share Options held
Cost Base
1 1,859 $3,104.50
2 1,859 $3,104.50
3 1,860 $3,106
Total 5,578 $9,315

If all tranches are exercised, Dan will hold 5,578 Downer shares with a total cost base of
$9,315 (cost base of $1.67 per Downer Share).
If all tranches lapse, Dan should be entitled to a capital loss of $9,315.
(e) Disposal of Spotless Shares by non-resident shareholders
In general terms, a non-resident Spotless Shareholder who holds Spotless Shares on
capital account should not be subject to Australian capital gains tax in relation to the
disposal of their Spotless Shares pursuant to the Offer unless:
 the non-resident Spotless Shareholder (together with associates) directly holds
10% or more of the issued shares in Spotless at the time of the disposal (non-
portfolio interest), or throughout a continuous period of 12 months within the two
years before the disposal; and
 at the time of the disposal, more than 50% of Spotless’ assets (by market value)
are “taxable Australian real property” (principal asset test).
Any non-resident Spotless Shareholder (together with associates) who holds a non-
portfolio interest should seek their own independent advice regarding the disposal of their
Spotless Shares.

page | 41

(f) Acquisition, exercise or cancellation of Downer Contingent Share Options by non-
resident shareholders
A non-resident Spotless Shareholder should only need to consider the Australian tax
consequences of acquiring, exercising or the cancellation of their Downer Contingent
Share Options if the non-resident Spotless Shareholder owns, before or after the exercise
of the Downer Contingent Share Options, a non-portfolio interest in Downer.
Any non-resident Spotless Shareholder (together with associates) who holds a non-
portfolio interest in Downer should seek their own independent advice regarding the
acquisition, exercise or cancellation of Downer Contingent Share Options.

(g) GST
The disposal of Spotless Shares by a Spotless Shareholder, the acquisition of Downer
Contingent Share Options and the acquisition of Downer Shares should not give rise to a
liability to account for GST, regardless of whether a Spotless Shareholder is registered for
GST. This on the basis such transactions should be considered an input taxed financial
supply, or outside the scope of GST.
If a Spotless Shareholder incurs GST on any acquisitions relating to the disposal of
Spotless Shares, the acquisition of Downer Contingent Share Options or the acquisition
of Downer Shares, the Spotless Shareholder should obtain independent advice in relation
to the precise GST implications, including whether any GST included in such acquisitions
is recoverable.
(h) Stamp duty
There should not be stamp duty (including landholder duty) payable by a Spotless
Shareholder on the disposal of your Spotless Shares. Further, no duty should arise on
the issue of Downer Contingent Share Options.
Based on current legislation, no duty should arise on the issue of the Downer Shares
provided at the time of issue, Downer is admitted to the Official List of the ASX and its
shares are quoted on that exchange and you acquire less than a 90% interest in Downer,
whether that be alone or together with associated or related persons or as part of one
transaction or arrangement with other persons. However, the legislation in force at the
time of exercise of any Downer Contingent Share Options should be considered at the
time of any proposed exercise.

9.3 Foreign resident capital gains withholding tax
Foreign resident capital gains withholding tax applies to a transaction involving the
acquisition of the ownership of an asset that is an Australian indirect real property interest
from a ‘relevant foreign resident’.
Under the Australian foreign resident capital gains withholding tax rules, Downer
Services, as the purchaser of your Spotless Shares is required to assess whether you as
a Spotless Shareholder are a ‘relevant foreign resident’ and whether your Spotless
Shares represent indirect Australian real property interests.
Downer Services has indicated in the Bidder’s Statement that Downer does not consider
that any withholding is required under these rules. Absent a material changes in
circumstances by the time your Spotless Shares are disposed of, Downer Services has
indicated that it does not intend to withhold under these rules.

page | 42

10 Additional information
10.1 Capital structure
As at the date of this Target Statement, the following securities on Spotless on issue are:
Class Number
Spotless Shares 1,102,239,882
10.2 Substantial holders
As at the date of this Target Statement, the substantial shareholders of Spotless are:
Name of holder Relevant Interest in
number of Spotless
Shares
Relevant
Interest as a %
of
Shareholding
Downer EDI Services Pty Ltd 1,098,203,638 99.6%
Coltrane Master Fund, L.P 130,419,321* 11.8%*

* Coltrane Master Find, L.P. has accepted the Offer and delivered to Downer Services a valid completed Acceptance Form. Until the transfer of
the relevant Spotless Shares to Downer Services is registered, Coltrane retains a relevant interest in the relevant Spotless Shares
10.3 Continuous disclosure
Spotless is a disclosing entity (as that term is defined in the Corporations Act) and is
subject to regular reporting and disclosure obligations under the Corporations Act.
Copies of documents may be obtained from the Spotless website at www.spotless.com.
Copies of documents lodged with ASIC in relation to Spotless may also be obtained from,
or inspected at, an ASIC office.
10.4 No other material information
This Target’s Statement is required to include all information that Spotless Shareholders
and their professional advisors would reasonably require to make an informed
assessment whether to accept the Offer, but:
− only to the extent to which it is reasonable for investors and their professional
advisors to expect to find the information in this Target’s Statement; and
− only if the information is known to any of the Spotless Directors.
The Independent Directors are of the opinion that the information that Spotless
Shareholders and their professional advisors would reasonably require to make an
informed assessment of whether to accept the Offer is the information contained in:
− the Bidder’s Statement and the Supplementary Bidder’s Statement (to the extent
that the information is not inconsistent with or superseded by information in this
Target’s Statement);

page | 43

− Spotless’ annual reports and public announcements before the date of this Target’s
Statement;
− documents lodged by Spotless with ASIC before the date of this Target’s
Statement; and
− this Target’s Statement.
The Independent Directors have assumed, for the purposes of preparing this Target’s
Statement, that the information contained in the Bidder’s Statement and Supplementary
Bidder’s Statement is accurate (unless they have expressly indicated otherwise in this
Target’s Statement). However, the Independent Directors do not take any responsibility
for the contents of the Bidder’s Statement and Supplementary Bidder’s Statement and
are not to be taken as endorsing, in any way, any or all of the statements contained in it.
In deciding what information should be included in this Target’s Statement, the
Independent Directors have had regard to:
− the nature of the Spotless Shares (being fully paid ordinary shares);
− the matters which Spotless Shareholders may reasonably be expected to know;
− the fact that certain matters may reasonably be expected to be known to the
professional advisors of Spotless Shareholders; and
− the time available to Spotless to prepare this Target’s Statement.
10.5 Directors of Spotless
The Directors of Spotless as at the date of this Target’s Statement are:
− John Humphrey (Chairman and Non-Executive Director)
− Peter Tompkins (Chief Executive Officer and Managing Director)
− Simon McKeon AO (Non-Executive Director)
− Grant Fenn (Non-Executive Director)
− Michael Ferguson (Non-Executive Director)
For the purpose of assessing the Offer, Spotless has established the IBC, which
comprises of the Independent Directors (being John Humphrey and Simon McKeon).
10.6 Relevant Interests of Directors in Spotless or Downer securities
As at 30 August 2020, except as set out below, no Director has a Relevant Interest in any
of the securities of Spotless or Downer or any other Related Body Corporate of Downer.

page | 44

Director Number of
Spotless
Shares held
directly or
indirectly
Number of
ordinary shares
in Downer held
directly or
indirectly
Number of
performance rights
held pursuant to the
Downer LTI Plan
John Humphrey Nil 44,221 Nil
Peter Tompkins Nil 257,172 76,894
Simon McKeon AO 800,000 Nil Nil
Grant Fenn Nil 2,049,772 307,573
Michael Ferguson Nil 57,718 73,048

10.7 Recommendation of Independent Directors
Each of the Independent Directors (being, John Humphrey and Simon McKeon)
unanimously recommend that Spotless Shareholders accept the Offer in respect of their
Spotless Shares, in the absence of a superior proposal, for the reasons set out in this
Target's Statement (particularly the matters discussed in Section 1).
The Non-Independent Directors (being Peter Tompkins, Grant Fenn and Michael
Ferguson) have not made a recommendation in relation to the Offer as they are also
officers of Downer or its Related Bodies Corporate.
10.8 Independent Directors’ intentions in relation to personal holdings
Simon McKeon intends, with respect to his personal holdings of Spotless Shares, to
accept the Offer.
10.9 Recent dealings of Directors in Spotless securities and Downer securities
No Director acquired or disposed of any Spotless Shares, any other securities in
Spotless, within the period of four months immediately preceding the date of this Target's
Statement.
Certain Directors, including John Humphrey (Independent Director) and Grant Fenn,
Peter Tompkins and Michael Ferguson (Non-Independent Directors) accepted into
Downer’s recent Entitlement Offer (announced on the same day as the Offer) and
acquired ordinary shares in Downer. On 4 August 2020, Grant Fenn, Peter Tompkins and
Michael Ferguson (all Non-Independent Directors) exercised certain of their performance
rights and were issued Downer Shares.
10.10 Benefits and agreements
No Independent Director has an interest in any contract entered into by them with Downer
Services or Downer. The Non-Independent Directors, who are not making a
recommendation in this Target's Statement, have interests in agreements entered into by
them with Downer that relate to their executive positions with Downer.

page | 45

As a result of the Offer, no benefit (other than a benefit permitted by section 200F or
200G of the Corporations Act) will or may be given to an Independent Director in
connection with their retirement from office in Spotless or a Related Body Corporate of
Spotless.
No Independent Director has agreed to receive, or is entitled to receive, any benefit from
Downer which is conditional on, or is related to, the Offer.
Spotless does not propose and, except as otherwise disclosed in this Target's Statement,
is not aware of any proposal in connection with the Offer:
(a) that will confer a benefit on any person in connection with the retirement of that
person from a board or managerial office of Spotless or Related Body Corporate of
Spotless; or
(b) that will or may be given to any person in connection with the transfer of the whole
or any part of undertaking or property currently owned by Spotless.
10.11 Consents
The following parties have given, and have not withdrawn before the date of this Target’s
Statement, their consent to be named in this Target’s Statement in the form and context
in which they are so named:
(a) Oaktower Partnership;
(b) Gilbert + Tobin;
(c) Ernst & Young;
(d) Link Market Services Limited; and
(e) the Independent Expert, including consenting to the inclusion of the Independent
Expert’s Report in this Target’s Statement as Attachment A,
and each of those parties:
(a) has not authorised or caused the issue of this Target’s Statement;
(b) does not make, or purport to make, any statement in this Target’s Statement or any
statement on which a statement in this Target’s Statement is based, other than a
statement included in this Target’s Statement with the consent of that party; and
(c) to the maximum extent permitted by law, expressly disclaims all liability in respect
of, makes no representation regarding and takes no responsibility for any part of
this Target’s Statement, other than a reference to its name and the statements (if
any) included in this Target’s Statement with the consent of that party.
As permitted by ASIC Class Order 13/521, this Target’s Statement may include or be
accompanied by statements which are made in documents lodged with ASIC or ASX.
Pursuant to the Class Order, provided this Target’s Statement fairly represents such
statements, the consent of the parties making those statements is not required for, and
those parties have not consented to, the inclusion of such statements in this Target’s
Statement. Spotless Shareholders may, during the Offer Period, obtain a copy of the
documents (free of charge) in which the aforementioned statements appear (or in which

page | 46

statements based on those statements appear, as the case may be), or the relevant
part(s) of any of those documents, by contacting the Spotless Shareholder Information
Line on 1300 202 738 (within Australia) or +61 1300 202 738 (outside Australia) at any
time between 8.30am and 5.30pm (AEST) on Business Days.
In addition, as permitted by ASIC Corporations (Consents to Statements) Instrument
2016/72, this Target’s Statement may include or be accompanied by statements fairly
representing a statement by an official person, or statements from a public official
document or a published book, journal or comparable publication.
As permitted by ASIC Corporations (Consents to Statements) Instrument 2016/72, this
Target’s Statement contains share price data sourced from IRESS without its consent.

page | 47
Approval of t
his Target’s Statement
This Target’s Statement has been approved by a resolution passed by the Independent
Directors.
Signed for and on behalf of Spotless Group Holdings Limited:
John Humphrey
Chairman of Spotless, Chairman of the Independent Board Committee and
Independent Non-Executive Director
1 S
eptember 2020

page | 48
11 Glossary and Interpretation
Glossary
The following defined terms in this Target’s Statement have the meanings set out below.
Acceptance Form means the acceptance form enclosed within the Bidder’s Statement.
Approvals mean means a licence, authority, consent, approval, order, exemption,
waiver, ruling or decision.
ASIC means the Australian Securities & Investments Commission.
ASX means ASX Limited (ABN 98 008 624 691) or, as the context requires, the financial
market known as the “Australian Securities Exchange” operated by that entity.
Bidder’s Statement means the bidder’s statement of Downer Services in relation to the
Offer dated 12 August 2020.
Business Day means a day other than a Saturday, Sunday or public holiday on which
banks are open for general banking business in Melbourne, Victoria.
Call Option means the call option deed entered into by Downer and Coltrane which
grants Downer a call option of 2.99% of Spotless Shares.
Coltrane means Coltrane Master Fund, L.P, of which Coltrane Asset Management L.P is
the investment manager.
Compulsory Acquisition Notice means the notice of compulsory acquisition of Spotless
by Downer lodged with ASIC and issued to Spotless Shareholders on 25 August 2020.
Corporations Act means the Corporations Act 2001 (Cth) and any regulations made
under that Act.
Directors means the directors of Spotless.
Deloitte Corporate Finance means Deloitte Corporate Finance Pty Limited (ACN 003
833 127)
Downer means Downer EDI Limited (ACN 003 872 848).
Downer Contingent Share Options means for every 17.92741 Spotless Shares
accepted into the Offer, a contingent share option exercisable over 1 Downer Share,
subject to the future market prices of Downer shares, as set out in Annexure B of the
Bidder’s Statement.
Downer Group means Downer and its Related Bodies Corporate.
Downer LTI Plan means the long term incentive plan of the Downer Group.
Downer Services means Downer EDI Services Pty Ltd (ACN 137 732 042).
Downer Shares means fully paid ordinary shares in the capital of Downer.

page | 49

EBIT means earnings before interest and tax.
Entitlement Offer means the accelerated non-renounceable pro rata entitlement offer
announced by Downer on 21 July 2020. The Entitlement Offer was undertaken in part to
raise capital to support the Offer. See section 4.3 of the Bidder’s Statement for further
information.
IBC means the Independent Board Committee established by the Spotless Board to
consider the Offer and comprising the Independent Directors.
Independent Directors means Mr John Humphrey and Mr Simon McKeon.
Independent Expert means Deloitte Corporate Finance.
Independent Expert’s Report means the report prepared by the Independent Expert, a
copy of which is attached to this Target’s Statement as Attachment A.
Non-Independent Directors means all of the Directors other than the Independent
Directors.
Offer means the off-market takeover offer by Downer Services for Spotless Shares under
the terms and conditions contained in Annexure A of the Bidder’s Statement.
Offer Period means the period during which the Offer will remain open for acceptance in
accordance with the terms and conditions of the Bidder’s Statement.
Offer Price means the price offered for Spotless Shares under the Offer, being $1.00
cash for each Spotless Share plus the Downer Contingent Share Options.
Register Date means 8.00am (Sydney time) on Wednesday, 12 August 2020, being the
date set by Downer Services under section 633(2) of the Corporations Act.
Related Body Corporate has the same meaning given it in section 50 of the
Corporations Act.
Relevant Interest has the meaning given to it in section 9 of the Corporations Act.
Share Registry means Link Market Services Limited (ACN 083 214 537) of Tower 4,
Collins Square, 727 Collins Street, Melbourne VIC 3000.
Spotless means Spotless Group Holdings Limited (ACN 154 229 562).
Spotless Board means the board of Directors of Spotless.
Spotless Group means Spotless and its Related Bodies Corporate.
Spotless Shareholder Information Line means the information line established by
Spotless to answer questions from Spotless Shareholders about the Offer.
Spotless Shareholders means the holders of Spotless Shares.
Spotless Shares means fully paid ordinary shares in the capital of Spotless.
Supplementary Bidder’s Statement means the supplementary bidder’s statement of
Downer Services in relation to the Offer dated 25 August 2020.

page | 50
Target’s Statement means t
his document and includes the attachment to it.
VWAP means the volume weighted average trading price on ASX.
Interpretation
(a)Words and phrases to which a meaning is given by the Corporations Act have that
meaning in this Target’s Statement unless that meaning is inconsistent with the
context in which the word or phrase is used.
(b)Headings are for convenience only and do not affect the interpretation of this
Target’s Statement.
(c)The singular includes the plural and vice versa and words importing any gender
include the other gender, and references to persons include corporations, other
bodies corporate, unincorporated bodies, partnership, joint ventures or
associations.
(d)References to sections are to sections of this Target’s Statement, unless stated
otherwise.
(e)Where a term is defined, its other grammatical forms have a corresponding
meaning.
(f)References to time are references to the time in Sydney, Australia on the relevant
date, unless stated otherwise.
(g)A reference to a statute, ordinance, code or other law includes regulations
and
ot
her instruments under it and consolidations, amendments, re-enactments or
replacements of any of them.
(h)“$” or “A$” or “AUD” is a reference to the lawful currency of Australia.

Attachment A
Attachment A Independent Expert's Report

Spotless Group Holdings Limited
Independent expert’s report and Financial Services Guide
30 August 2020

30 August 2020
Deloitte Corporate Finance Pty Limited, ABN 19 003 833 127, AFSL 241457 of Level 1 Grosvenor Place, 225 George Street, Sydney NSW 2000
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities. DTTL (also referred
to as “Deloitte Global”) and each of its member firms and their affiliated entities are legally separate and independent entities. DTTL does not provide services to
clients. Please see www.deloitte.com/about to learn more.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
Financial Services Guide (FSG)
What is an FSG?
An FSG is designed to provide information about the
supply of financial services to you.
Why are we providing this FSG to you?
Deloitte Corporate Finance Pty Limited (DCF) (AFSL
241457) has been engaged by Spotless Group Holdings
Limited (Spotless) to prepare an independent expert’s
report (our Report) in connection with the proposed
takeover of Spotless. Spotless will provide our Report to
you.
Our Report provides you with general financial product
advice. This FSG informs you about the use of general
financial product advice, the financial services we offer,
our dispute resolution process and our remuneration. Our
contact details are in the document that accompanies this
FSG.
What financial services are we licensed to
provide?
We are authorised to provide financial product advice and
to arrange for another person to deal in financial products
in relation to securities, interests in managed investment
schemes, government debentures, stocks or bonds, to
retail and wholesale clients. We are also authorised to
provide personal and general financial product advice and
deal by arranging in derivatives and regulated emissions
units to wholesale clients, and general financial product
advice relating to derivatives to retail clients.
We are providing general financial product
advice
In our Report, we provide general financial product advice
as we have not taken into account your personal
objectives, financial situation or needs, and you would not
expect us to have done so. You should consider whether
our general advice is appropriate for you, having regard to
your own personal objectives, financial situation or needs.
If our advice is in connection with the acquisition of a
financial product, you should read the relevant offer
document carefully before making any decision about
whether to acquire that product.
How are we remunerated?
Our fees are usually determined on a fixed fee or time cost
basis plus reimbursement of any expenses incurred in
providing the services. Our fees are agreed with, and paid
by, those who engage us. You are not responsible for our
fees.
We will receive a fee of approximately $350,000 exclusive
of GST in relation to the preparation of our Report. This
fee is not contingent on the outcome of proposed takeover
of Spotless.
Apart from these fees, DCF, our directors and officers, and
any related bodies corporate, affiliates or associates, and
their directors and officers, do not receive any
commissions or other benefits.
All employees receive a salary, and, while eligible for
annual salary increases and bonuses based on overall
performance, they do not receive any commissions or
other benefits as a result of the services provided to you.
The remuneration paid to our directors reflects their
individual contribution to the organisation and covers all
aspects of performance.
We do not pay commissions or provide other benefits to
anyone who refers prospective clients to us.
Associations and relationships
The Deloitte member firm in Australia (Deloitte Touche
Tohmatsu) controls DCF. Please see
www.deloitte.com/au/about for a detailed description of
the legal structure of Deloitte Touche Tohmatsu.
We, and other entities related to Deloitte Touche
Tohmatsu, do not have any formal associations or
relationships with any entities that are issuers of financial
products. However, we may provide professional services
to issuers of financial products in the ordinary course of
business.
Deloitte has not had any involvement in providing advice
connected with the Proposed Takeover. In the last 2 years
Deloitte has provided advice and services to Spotless that
are not connected with the Proposed Takeover. None of
the individuals who were involved in preparing this report
have provided services or advice to Spotless in the past 2
years.
What should you do if you have a complaint?
If you have a concern about our Report, please contact us:
The Complaints Officer
PO Box N250
Grosvenor Place
Sydney NSW 1220
complaints@deloitte.com.au
Phone: +61 2 9322 7000

If an issue is not resolved to your satisfaction, you can
lodge a dispute with the Australian Financial Complaints
Authority (AFCA). AFCA provides fair and independent
financial services dispute resolution free to consumers.
www.afca.org.au
1800 931 678 (free call)
Australian Financial Complaints Authority Limited
GPO Box 3 Melbourne VIC 3001
What compensation arrangements do we have?
Deloitte Australia holds professional indemnity insurance
that covers the financial services we provide. This
insurance satisfies the compensation requirements of the
Corporations Act 2001 (Cth).

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 1











The Independent Directors
Spotless Group Holdings Limited
549 St Kilda Road
Melbourne VIC 3004

30 August 2020

Dear Directors

Re: Independent expert’s report
Introduction
On 21 July 2020, Downer EDI Services Pty Ltd, a wholly-owned subsidiary of Downer EDI Limited
(Downer) announced an unconditional offer to acquire all of the issued share capital in Spotless Group
Holdings Limited (Spotless or the Company) that Downer does not already own (the Proposed
Takeover). The consideration offered by Downer to holders of Spotless shares other than Downer (Non-
Associated Shareholders) is $1.00 per Spotless share plus, for every 17.92741 Spotless shares accepted
into the Spotless Offer, a Downer contingent share option exercisable over 1 Downer share, subject to
the future market prices of Downer shares (DCSO) (the Consideration).
On 20 August 2020, Downer opened the takeover offer by dispatching the bidder’s statement to Non-
Associated Shareholders. On 25 August 2020, Downer announced that Coltrane Master Fund, L.P.
(Coltrane) which controls approximately 11.8% of the issued shares of Spotless, has accepted the
takeover offer and as a result, Downer now has a relevant interest of 99.6%. Downer also announced
that it has commenced compulsory acquisition of all remaining Spotless shares it does not own, as it is
entitled to do so, under the Corporations Act.
The full details of the Proposed Takeover are included in a Bidder’s Statement which was issued by
Downer on 12 August 2020. An overview of the Proposed Takeover is provided in Section 1 of our
detailed report.
The directors of Spotless will issue a Target’s Statement, which will include their recommendation as to
whether or not Non-Associated Shareholders should accept the Proposed Takeover.
Purpose of the report
Under Section 640 a Target’s Statement given in response to a takeover offer must include, or be
accompanied by, an independent expert’s report if either the bidder’s voting power in the target is 30%
or more, or the bidder and target have one or more common directors, to assist non-associated
shareholders in their decision whether to accept or reject the takeover offer. As Downer owns more than
30% of Spotless, an independent expert’s report is therefore required under Section 640.
The independent directors of Spotless (the Independent Directors) have engaged Deloitte Corporate
Finance Pty Limited (Deloitte Corporate Finance) to provide an independent expert’s report advising
whether or not, the Proposed Takeover is fair and reasonable.
Deloitte Corporate Finance Pty Limited
A.B.N. 19 003 833 127
AFSL 241457

Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia

DX: 10307SSE
Tel: +61 2 9322 7000
Fax: +61 2 9254 1198
www.deloitte.com.au

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 2


This report is to be included in a Target’s Statement and has been prepared for the exclusive purpose of
assisting Non-Associated Shareholders in their consideration of the Proposed Takeover. Neither Deloitte
Corporate Finance, Deloitte Touche Tohmatsu, nor any member or employee thereof, undertakes
responsibility to any person, other than the Non-Associated Shareholders and Spotless, in respect of this
report, including any errors or omissions however caused.
Basis of evaluation
In undertaking the work associated with this report, we have had regard to Australian Securities and
Investments Commission (ASIC) Regulatory Guide 111 in relation to the content of an expert’s report
and ASIC Regulatory Guide 112 in respect of the independence of experts. The Regulatory Guide
prescribes standards of best practice in the preparation of independent expert’s reports pursuant to
Section 640.
To assess whether or not the Proposed Takeover is fair and reasonable to Non-Associated Shareholders,
we have adopted the tests of whether the Proposed Takeover is either fair and reasonable, not fair but
reasonable, or neither fair nor reasonable, as set out in ASIC Regulatory Guide 111.
Definition of value
For the purpose of our opinion, we have referred to the concept of fair market value. Fair market value
is defined as the amount at which the shares in the entities valued would be expected to change hands
in a hypothetical transaction between a knowledgeable willing, but not anxious, buyer and a
knowledgeable willing, but not anxious, seller acting at arm’s length.
Special purchasers may be willing to pay higher prices to reduce or eliminate competition, to ensure a
source of material supply or sales, or to achieve cost savings or other synergies arising on business
combinations, which could only be enjoyed by the special purchaser. Our valuation has not been
premised on the existence of a special purchaser.
Summary and conclusion
In our opinion the Proposed Takeover is fair and reasonable. In arriving at this opinion, we have had
regard to the following factors.
The Proposed Takeover is fair
According to ASIC Regulatory Guide 111, in order to assess whether the Proposed Takeover is fair, the
independent expert is required to compare the fair market value of a share in Spotless on a control basis
with the fair market value of the consideration offered. The Proposed Takeover is fair if the value of the
Consideration is equal to or greater than the value of a Spotless share.
Set out in the table below is a comparison of our assessment of the market value of a Spotless share
with the Consideration offered by Downer.
Table 1: Assessment of fairness
$ (unless otherwise stated) Section Low High
Estimated market value of a Spotless share 4.1 0.83 1.11
Estimated market value of the Consideration 5.1 1.07 1.12
Premium of Consideration over market value of a Spotless share 0.24 0.01
Premium % 28% 1%
Source: Deloitte Corporate Finance analysis
The market value of the Consideration is at the top end of the range of our estimate of the market value
of a Spotless share. Accordingly, it is our opinion that the Proposed Takeover is fair.

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 3
Between $0.07 per share and $0.12 per share of the Consideration relates to the DCSOs. Excluding this
component of the Consideration (if a Non-Associated Shareholder was to hold the view that there is too
much uncertainty associated with the achievability of the target prices) would still result in the cash
component of the Consideration being slightly higher than the mid-point of our assessed market value of
a Spotless share and thus in our opinion, the Proposed Takeover would still be fair.
If at any time during the 4 year life of the DCSOs Downer shares trade at prices between $6.382 and
$7.364 the value of the DCSOs would be up to $0.41 per Spotless share. However, there is risk that
these target prices might not be achieved given that the current price of Downer shares is $4.22. On a
risk adjusted basis we have determined that the current market value of a DCSO is between $0.07 and
$0.12 cents per Spotless share as set out in Section 5.
Non-Associated Shareholders will need to have regard to their own risk tolerance and other factors
specific to them in order to form a view on the value of the DCSOs to them, in particular, in light of the
fact that the DCSO will not be capable of being traded on a securities exchange.
Valuation of Spotless
We have estimated the market value of Spotless by applying the earnings multiples approach and
discounted cash flow approach.
Table 2: Spotless valuation summary
Section Unit Low High
Earnings multiples approach 4.3 $m 1,700 2,138
Discounted cash flow approach 4.4 $m 1,798 2,043
Enterprise value range (selected) $m 1,800 2,100
Less: net debt 4.5.1 $m (836) (836)
Less: debt-like liabilities 4.5.2 $m (96) (96)
Add: surplus assets 4.5.3 $m 51 51
Equity value $m 919 1,219
Number of shares on issue 4.6 m 1,102 1,102
Value per share $ 0.83 1.11
Source: Deloitte Corporate Finance analysis
Our valuation range is wider that would normally be the case. This reflects the current uncertainty
associated with the impacts of the COVID-19 pandemic on capital markets and Spotless’ business
operations, and the high level of debt that Spotless is carrying.
Under the earnings multiples approach we have assessed the maintainable EBITDA to be in the range of
$200m to $225m based on our analysis of a normalised level EBITDA having regard to the current
market environment and management’s plans within the business.
The selected earnings multiple of 8.5 times to 9.5 times (on a control basis) was based on the earnings
multiples of listed comparable companies and transactions in the facilities services industry.
The discounted cash flow approach requires the determination of an appropriate discount rate and the
projection of future cash flows. We selected a nominal after tax discount rate in the range of 8.5% to
9.5% to discount the estimated future cash flows to their present value. When applying the discounted
cash flow approach and having regard to the uncertainty with respect to medium-term and long-term
future projections in the current environment, we considered a number of future cash flow scenarios.
Further details of our valuation of Spotless are set out in Section 4.

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 4


Valuation of the Consideration
We have valued the Consideration offered to Non-Associated Shareholders under the Proposed Takeover
at between $1.07 and $1.12.
Table 3: Valuation of the Consideration

Consideration per Spotless share
Component Low High
Cash $1.00 $1.00
DCSO
1
$0.07 $0.12
Total $1.07 $1.12
Note:
1. Represents the value of DCSOs that one Spotless security is entitled to (i.e. 1/17.92741 of a DCSO)
Source: Deloitte Corporate Finance analysis
In order to value the DCSO we had regard to the terms of issue and that they only offer value through
potential future increases in the price of Downer shares. For this reason, we used an option pricing
model to estimate this value.
Further details of our valuation of each DCSO is set out in Section 5.
The Proposed Takeover is reasonable
In accordance with ASIC Regulatory Guide 111 an offer is reasonable if it is fair. On this basis, in our
opinion the Proposed Takeover is reasonable.
Notwithstanding, we set out below a number of reasonableness considerations.
Acceptance of the Proposed Takeover will allow Non-Associated Shareholders to receive
the Consideration sooner than through compulsory acquisition
Coltrane, who previously owned 11.8% of the shares in Spotless has accepted the Proposed Takeover.
Downer has now commenced compulsory acquisition of all shares not currently owned by Downer.
As noted in the Bidder’s Statement, if Non-Associated Shareholders wait until compulsory acquisition,
they will receive payment later than through the Proposed Takeover process.
There is certainty in the cash component of the Consideration
The Proposed Takeover represents an opportunity for Non-Associated Shareholders to realise their
investment in Spotless with the certainty of the cash component of the Consideration offered under the
Proposed Takeover and without incurring any transaction costs.
The Proposed Takeover provides liquidity for Non-Associated Shareholders
Shares in Spotless are no longer traded on the Australian Securities Exchange. Consequently, there are
limited opportunities for Non-Associated Shareholders to achieve liquidity for their shares. The
Consideration offered under the Proposed Takeover provides Non-Associated Shareholders with the
ability to sell their shares.
Spotless has not paid any dividend for the past three financial years. Furthermore, there remains
uncertainty regarding if and when dividends will resume with the backdrop of the COVID-19 pandemic.
Downer already has control of Spotless
Downer through its ownership of 87.8% of the shares (which has increased to 99.6% following
Coltrane’s acceptance of the Proposed Takeover) has control of Spotless. In addition, of the 5 directors
that comprise the Board of Spotless, 3 are Downer representatives.
As a result, it is able to control the business operations of Spotless and can influence the cash flows
received by all shareholders and in particular Non-Associated Shareholders.

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 5


Also, given our assessment of fairness has been undertaken on a control basis, and we have formed the
view that the Consideration is fair, it follows that Non-Associated Shareholders are receiving control
value despite not having control.
There is financing risk in the current environment
Spotless has substantial levels of debt. Whilst Spotless was in compliance with all covenants as at 30
June 2020, management of Spotless were able to negotiate a temporary increase to the leverage ratio in
the event that these may have been breached at 30 June 2020 or in the immediately following reporting
period. Should there be any further impacts on earnings and a further extension to the increase in
leverage ratio not be forthcoming, Spotless may need to consider alternative courses of action that may
not be value accretive to shareholders.
The likelihood of an alternative superior offer emerging is low
We believe that an alternative takeover offer is unlikely as any such offer would require Downer to sell
its shares which we also consider to be unlikely. On this basis, Non-Associated Shareholders are
unlikely to receive a superior offer.
Downer is likely to realise additional benefits from having 100% ownership of Spotless
Our assessment of fairness has reflected certain benefits of control available to market participant
buyers of Spotless. However, it may be the case that Downer is able to extract certain other benefits
that are unique to it which are not taken into account in our assessment of fairness.
Opinion
In our opinion, the Proposed Takeover is fair and reasonable to Non-Associated Shareholders.
An individual shareholder’s decision in relation to the Proposed Takeover may be influenced by his or her
particular circumstances. If in doubt the shareholder should consult an independent adviser, who should
have regard to their individual circumstances.
This opinion should be read in conjunction with our detailed report which sets out our scope and
findings.

Yours faithfully

Tapan Parekh
Authorised Representative
AR Number: 461009

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 6


Glossary

Reference Definition
$ Australian dollars
ACCC Australian Competition and Consumer Commission
ASIC Australian Securities and Investments Commission
ASX Australian Securities Exchange
Bidder’s Statement
Statement from Downer regarding the Proposed Takeover lodged in 12 August
2020
CAPM Capital Asset Pricing Model
Coltrane Coltrane Master Fund, L.P.
Company Spotless Group Holdings Limited
Consideration
Downer consideration for Spotless shares of $1 cash and 1 DCSO for every
17.92741 Spotless shares
COVID-19 Novel Coronavirus
DCF Discounted cash flow
DCSO Downer Contingent Share Option
Deloitte Deloitte Touche Tohmatsu
Deloitte Corporate
Finance
Deloitte Corporate Finance Pty Ltd
Downer Downer EDI Services Limited
EBIT Earnings before interest and tax
EBITA Earnings before interest, tax and amortisation
EBITDA Earnings before interest, tax, depreciation and amortisation
EV Enterprise Value
FSG Financial Services Guide
FY Financial year ended 30 June
Independent
Directors
Independent Directors of Spotless
KPIs Key performance indicators
NPAT Net profit after tax
Non-Associated
Shareholders
Holders of Spotless shares other than Downer
nRAH New Royal Adelaide Hospital
PPP Public-private partnership
Proposed Takeover
Downer’s proposed acquisition of Spotless shares owned by Non-Associated
Shareholders
Spotless Spotless Group Holdings Limited
Target’s Statement Statement from Spotless responding to the Bidder’s Statement

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 7


Table of contents
1 Overview of the Proposed Takeover 8
2 Basis of evaluation 11
3 Profile of Spotless 13
4 Valuation of Spotless 25
5 Valuation of the Consideration 35
Appendix 1: Key industry themes 37
Appendix 2: Valuation methodologies 40
Appendix 3: Comparable entities 41
Appendix 4: Comparable transactions 45
Appendix 5: Volatility analysis 46
Appendix 6: Context to the report 47

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 8


1 Overview of the Proposed Takeover
1.1 Background to the Proposed Takeover
In March 2017 Downer made a takeover offer for Spotless after initially acquiring a 15% interest. It
ultimately acquired 87.8% of Spotless’ shares with Coltrane, a New York based hedge fund, holding
10.6% of the shares.
On 21 July 2020, Downer announced that it had entered into a call option deed with Coltrane over
2.99% of the issued shares of Spotless, which, if exercised will result in Downer’s interest increasing
above the 90% compulsory acquisition threshold.
On 12 August 2020 Downer lodged an unconditional offer to acquire all of the issued shares in Spotless
that it does not already own.
On 20 August 2020, Downer opened the Proposed Takeover by dispatching the bidder’s statement to
Non-Associated Shareholders. On 25 August 2020, Downer announced that Coltrane which controls
approximately 11.8% of Spotless shares, has accepted the Proposed Takeover and as a result, Downer
now has a relevant interest of 99.6%. Downer also announced that it has commenced compulsory
acquisition of all outstanding Spotless shares as it is entitled to do so, under the Corporations Act.
The Consideration under the Proposed Takeover is:
• Cash: $1.00 cash per Spotless share; plus
• DCSO: one Downer contingent share option for every 17.92741 Spotless shares
There are no conditions attaching to the Proposed Takeover and Non-Associated Shareholders will
receive the cash consideration within seven days of acceptance. The DCSOs will be issued within seven
days of the end of the offer period, which is currently 21 September 2020 per the Bidder’s Statement.
The key terms of each DCSO is summarised below:
• They will be issued in three tranches, with each tranche subject to a target pricing condition
• The target price condition is satisfied when, in respect of a series, Downer’s 5-day volume
weighted average price is equal to or exceeds the relevant target price (as stipulated in the table
below) for that series
• The exercise price for each DCSO series is nil
• The DCSOs expire 4 years after the first date on which offers are open for acceptance under the
Proposed Takeover. If the target price condition is satisfied during the 4 year period, that tranche
of the DCSOs will be capable of being exercised
Table 4: DCSO target prices
Series Target price
Tranche 1 $6.382
Tranche 2 $6.873
Tranche 3 $7.364
Source: Bidder’s statement
The above target prices have been adjusted for a capital raising recently undertaken by Downer.
The terms of the DCSOs are set out in Annexure B of the Bidder’s Statement. We highlight the following:
• The DCSOs do not entitle a holder to a shareholder vote
• The DCSOs do not entitle a holder to receive dividends or to participate in new issues of capital
offered to Downer shareholders
• Unless a holder elects a manual exercise, each DCSO will be automatically exercised in relation to
a series, without any further action being required by the holder on the exercise date for that
series if the target price condition applicable to that DCSO series is satisfied
• Our understanding is that whilst there are no restrictions on a Non-Associated Shareholder selling
their DCSOs, they will not be listed on any securities exchange

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 9


• there appears to be ambiguity as to what happens to the DCSOs if Downer is subject to a
takeover offer during the term of the DCSOs and that takeover offer price is less than the target
prices. Specifically, if Downer shares are delisted from the Australian Securities Exchange (or the
New Zealand Stock Exchange), it would not be possible to determine whether the target price has
been attained under the terms of the DCSOs.
1.2 Background to Downer
Downer designs, builds and maintains infrastructure and facilities and is a leading provider of integrated
services in Australia and New Zealand. It’s history dates back over 150 years and its shares are traded
on the Australian Securities Exchange and the New Zealand Stock Exchange. Downer employs
approximately 52,000 people mostly in Australia and New Zealand but also in the Asia Pacific region,
South America and South Africa.
For the year ended 30 June 2020, Downer reported revenue of $12.7b, underlying EBITA of $416.0m
and a net loss after tax of $155.7m. Given Downer consolidates Spotless, these figures include the
financial results of Spotless. We present a summary of Downer’s operating segments in the figures
below.
Figure 1: Downer operating segment split



Note: Excluding unallocated revenue/costs
Source: Annual report, Deloitte Corporate Finance analysis
As at 27 August 2020 Downer had a share market capitalisation of $3.1b.
The recent share trading history on the Australian Securities Exchange relative to the target prices for
the various tranches of DCSO is set out in the figure below:
Figure 2: Downer share trading


Source: Capital IQ, Deloitte Corporate Finance analysis
FY20
Revenue
FY20
EBITDA

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 10


1.3 Downer’s intentions if the Proposed Takeover proceeds
If the Proposed Takeover proceeds, Downer intends to:
• operate Spotless as a wholly owned subsidiary. The current independent directors of the Spotless
board will retire and will be replaced with members of Downer's management team
• realise synergies in the range of $10m to $15m per annum. Downer expects to be able to achieve
these synergies by eliminating redundant corporate management structures, integrating
operations and refinancing debt facilities
• review and where appropriate replace current debt facilities, so that Spotless can take advantage
of the Downer Group’s debt platform.
Certain initiatives currently being pursued by Spotless, including the disposal of the Laundries business,
review of the Hospitality business, and the run-off of higher-risk construction projects, will continue to
be pursued by Downer.
Further details of Downer’s intentions can be found in Section 6 of the Bidder’s Statement.

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 11


2 Basis of evaluation
2.1 Guidance
In undertaking the work associated with this report, we have had regard to ASIC Regulatory Guide 111
in relation to the content of expert’s reports and ASIC Regulatory Guide 112 in respect of the
independence of experts.
Section 640 of the Corporations Act 2001 (Section 640) requires an independent expert’s report in
connection with a takeover offer to state whether, in the expert’s opinion, the takeover offer is fair and
reasonable.
ASIC Regulatory Guide 111
This regulatory guide provides guidance in relation to the content of independent expert’s reports
prepared for a range of transactions. It notes that the basis of evaluation selected by the expert must
be appropriate for the nature of each specific transaction.
ASIC Regulatory Guide 111 refers to a ‘control transaction’ as being the acquisition (or increase) of a
controlling stake in a company that could be achieved, for example, by way of a takeover offer, scheme
of arrangement, approval of an issue of shares using item 7 of s611, a selective capital reduction or
selective buy back under Chapter 2J.
In respect of control transactions, under ASIC Regulatory Guide 111 an offer is:
• fair, when the value of the consideration is equal to or greater than the value of the shares
subject to the proposed scheme. The comparison must be made assuming 100% ownership of the
target company.
• reasonable, if it is fair, or, despite not being fair, after considering other significant factors,
shareholders should accept the offer under the proposed scheme, in the absence of any higher
bids before the close of the offer.
2.2 Fairness
ASIC Regulatory Guide 111 defines an offer as being fair if the value of the offer price is equal to or
greater than the value of the securities subject to the offer. The comparison must be made assuming
100% ownership of the target company.
We have assessed whether the Proposed Transaction is fair by comparing the value of a Spotless share
to the value of the Consideration to be received from Downer. We have assessed the value of each
Spotless share by estimating the current value of Spotless on a control basis and dividing this value by
the number of shares on issue.
The Spotless shares have been valued at market value, which we have defined as the amount at which
the shares would be expected to change hands between a knowledgeable and willing but not anxious
buyer and a knowledgeable and willing but not anxious seller, neither of whom is under any compulsion
to buy or sell.
Special purchasers may be willing to pay higher prices to reduce or eliminate competition, to ensure a
source of material supply or sales, or to achieve cost savings or other synergies arising on business
combinations, which could only be enjoyed by the special purchaser. Our valuation of a Spotless share
has not been premised on the existence of a special purchaser.
2.3 Reasonableness
ASIC Regulatory Guide 111 considers an offer in respect of a control transaction to be reasonable if
either:
• the offer is fair
• despite not being fair, but considering other significant factors, shareholders should accept the
offer in the absence of any higher bid before the close of the offer.

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 12


To assess the reasonableness of the Proposed Transaction we considered the following factors in addition
to determining whether the Proposed Transaction is fair:
• the fact that the Proposed Transaction allows Non-Associated Shareholders to realise their
investment in Spotless
• the likelihood of an alternative offer being made
• other implications associated with Non-Associated Shareholders not accepting the Proposed
Transaction.
2.4 Limitations
This report should be read in conjunction with Appendix 6.

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 13


3 Profile of Spotless
3.1 Introduction and company history
Spotless Group is a provider of outsourced integrated facility services to various industries across
Australia and New Zealand. The company is headquartered in Melbourne, Australia and was listed on the
Australian Securities Exchange from 2014 to 2019.
Key milestones in the company’s history are outlined in the table below.
Table 5: Key events in corporate history

1946 • Founded in Fitzroy Melbourne, Australia
2011 • Entered into the new Royal Adelaide Hospital (nRAH) contract as part of a consortium
2014
• Diversified into security services across Australia
• Acquired Aladdin Laundry and International Linen Services to become a provider of commercial
laundry services
• Relisted on the ASX following a period of ownership by private equity
2015
• Developed air conditioning and mechanical services line of business through acquisition of AE
Smith
• Launched into meter reading, energy efficiency and utilities services through acquisition of
Utility Services Group
2017
• Downer made a takeover offer at $1.15 cash per Spotless share in March
• Coltrane increased its interest in Spotless to 10.6%
• Announcement of intention to acquire Cabrini Laundry in Victoria
• Contract rationalisation by a new management team, resulted in an impairment of intangibles
and other assets totalling $464m in FY17
• nRAH opened and services were mobilised
• Downer closed the takeover offer in August having acquired 87.8% of Spotless
2018 • Challenges with the delivery of the nRAH contract result in a $51.4m impairment in FY18
2019

• Acquisition of Envar Group for consideration of c.$25m. Envar specialises in engineering,
construction, maintenance, service and fabrication of heating, ventilation and air conditioning
systems and works on projects ranging across office blocks, resorts, hospitals and shopping
centres
• Coltrane acquired additional shares between March and August, increasing its shareholding to
11.8%
• Delisted from the ASX (August 2019)
2020

• COVID-19 and associated shutdowns across Australia and New Zealand cause wide ranging
impact on the Spotless business and require it to stand down substantial components of the
workforce
• Proposals received in respect of disposal of the Laundries business. Two of the proposals are
currently the subject of ACCC review with the ACCC announcing on 27 August 2020 that it has
preliminary concerns with regards to one of the proposals.
Source: Capital IQ, Spotless, Management discussions
3.2 Service offerings, markets and operations
3.2.1 Overview of the business
Spotless operates through a range of brands (such as Alliance, Epicure, UASG, Skilltech, Taylors and
Ensign) to deliver integrated, multi-service facility services.
Spotless has a workforce of approximately 21,000 staff in 50 offices and services approximately 4,182
contracts from a diverse range of sectors. The company provides the following services:
• Facilities management and maintenance: covering a broad range of services including project
management, asset due diligence/condition assessments, lifecycle planning and replacements,
building management systems, trade services, construction/refurbishments, compliance, grounds
and gardening, handyman services, painting, pest control, procurement expertise, retail fit outs,
water management, vegetation management and rehabilitation
• Security: Operates security sites providing onsite security, remote monitoring, and security
installation mainly for sports stadiums and hospitals
• Cleaning and waste management: Cleaning services are offered to clients across Australia in
metropolitan, regional and remote areas. The range of cleaning services includes commercial and
retail cleaning, grounds and maintenance services, heavy and light industrial environment

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 14


cleaning, hygiene and washroom services, pest control, sterile and hygienic cleaning, waste
management, recycling and window cleaning
• Utility infrastructure: Spotless designs, constructs and maintains utility networks and is
Australia’s leading metering, logistics and field operations provider. Spotless offers solutions to
domestic, commercial and industrial markets, including advanced metering solutions and related
mobile technology, pole reinstatement systems, asset inspection and monitoring, electrical
construction and maintenance, technical and design solutions and servicing and replacement of
mains
• Catering and hospitality services: Spotless offers tailored catering and hospitality services to
stadiums, aged care, schools and tertiary institutions, hospitals, business and industry canteens
as well as functions and special events
• Laundry and Linen Services: Spotless provides a comprehensive laundry service offering
including linen supply, laundering and management for accommodation, hospitality and
healthcare sectors, workwear laundering, linen rental and management, workwear supply and
design. This business is currently the subject of a sale process which requires ACCC approval.
3.3 Profile of contracts and customers
Spotless’ portfolio is structured into different lines of business, each with a line of business head and
support team. The lines of business are categorised as follows:
• Government & Citizen Services
• Defence and Resources (now known as Defence)
• Asset and Development Services
• Health & Education
• Hospitality
• New Zealand
• Laundries
• Utilities.
The segmentation of revenue is set out below:
Figure 3: FY20 Revenue split by line of business
¹

Figure 4: FY20 revenue split by Australia(state)
and New Zealand
²



Note:
1. Revenue is presented on a gross basis (excluding corporate eliminations)
2. Revenue is presented in a net basis
Source: Financial statements, Management discussions


Spotless has a growing and resilient market, which has the following key characteristics:
• Gross revenue generated from government line of business accounts for 20.5% of revenue in
FY20
• Approximately 70% of gross revenue in FY20 relates to priority markets including Government,
Defence, Health & Education and Infrastructure
• A significant portion of FY21 budgeted revenue is contracted and contains built in price escalation
clauses
• The top 10 contracts accounted for 41.6% of gross revenue in FY20. The weighted average
contract tenure is approximately 10.4 years for the top 10 contracts.
• Adjusted EBIT margins (exclusive of one-off individually significant items totalling $141.1m and
corporate cost allocations) for the top 10 contracts averaged 9.6% in FY20, compared to adjusted
626
620
463
415
322
298
212
157
Government &
Citizen Services
Defence & Resources
Hospitality
Health & Education
Asset & Development
services
Laundries Australia &
New Zealand
New Zealand
Utilities
FY20
revenue
$3,060m
22%
20%
18%
14%
10%
9%
7%
NSW
QLD
VIC
SA
New Zealand
WA
Other

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 15
EBIT for the Group of 5.2%. The higher margins for the top 10 contracts are driven by large
contracts across the Defence, Health and Education and Government sectors
•A number of long-term PPP contracts with maturities up to 2062
Set out in Appendix 1 are some key themes for the industries Spotless operates in.
3.4 Recent acquisitions
The business has experienced inorganic growth over the past three years due to the following
acquisitions:
•Envar Group acquired in FY19: The Envar Group specialises in engineering, construction,
maintenance, service and fabrication of heating, ventilation and air conditioning systems and
works on projects ranging across office blocks, resorts, hospitals and shopping centres. Their
main operations are based in WA with a smaller footprint in NSW. The group has a diversified and
repeat customer base with long standing relationships of over 40 years.
•Cabrini Laundry acquired in FY18: The acquisition of the Cabrini hospital’s 3-year old laundry,
had a 15-year exclusive contract with the Cabrini facilities (including the hospital) and health
contracts worth approximately $20m of revenue per annum.
3.5 Contract rationalisation/simplification programme
In August 2016, the newly formed management team of Spotless developed a strategy to optimise and
grow the contract portfolio. The new management team reviewed the business model and refocussed
the business on Health, Education, Defence, Infrastructure and Government clients, with an expectation
of higher growth in those segments. The focus under the new strategy was to target long dated,
expandable multi-service contracts, which leverage the businesses scale, geographic reach and breadth
of the businesses’ capabilities, thereby delivering higher return.
In executing the strategy, the business undertook a detailed review of its contract book and identified a
list of smaller, underperforming contracts which it rationalised to improve financial performance and
reduce operational complexity.
The removal of some of these less strategic and less profitable contracts, resulted in an impairment of
goodwill, customer intangibles and other assets totalling $464.4m in FY17. Notwithstanding Downer
taking control and a new management team being employed, the rationalisation strategy continued and
further contract rationalisation and portfolio restructure costs were incurred in FY18 ($49.5m) and in
FY20 ($85.1m). The group continues to be on that journey with the COVID-19 pandemic creating
greater urgency around the rationalisation.
3.6 Impact of the COVID-19 pandemic
The COVID-19 pandemic has had and continues to have varied impacts across the group:
•Hospitality: all major event venues and other customer premises were either temporarily closed
or running at a lower capacity. As a result, 6,000 staff were stood down. The Hospitality business
was placed into hibernation, awaiting demand to recover. In addition, a number of contracts were
exited where the returns were marginal and with respect to a number of other contracts, cost plus
arrangements were negotiated
•Laundries: lower volumes from hospitals where non-urgent elective surgery was temporarily
suspended to ensure adequate hospital capacity to respond to COVID-19. In early August 2020,
one of the laundries in Melbourne was forced to shut down for a short time due to a number of
employees testing positive for COVID-19 and has subsequently been reopened
•Asset and Development Services: delays to non-essential maintenance and capital works
•New Zealand: Spotless received wage subsidies of $22m from the New Zealand government in
FY20, to assist the businesses impacted by the COVID-19 pandemic.
The remaining lines of business were largely unaffected by COVID-19 and the temporary downturn in
the above lines of business was partially offset by an increase in demand from Government, Health and
Defence contracts. Volumes in the Laundries segment have started to recover as it relates to health
sector contracts which comprise the majority of the business, however the accommodation linen
business is only anticipated to return to normalised levels by FY23.

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 16


There remains the risk, as evident through lockdowns being reinstated recently in Victoria and New
Zealand, that there could be further negative impacts.
3.7 Laundries
The Laundries business unit has been the subject of review for a number of years, due to the high
capital investment required and the competitive nature of the market segments in which it operates.
The acquisition of Cabrini laundry in July 2017 whilst giving access to long term contracts in the
healthcare sector was also undertaken to avoid capital investment. Since then, Spotless has closed a
number of underperforming plants and repositioned the business as two standalone businesses,
operating under the Ensign brand in Australia and the Taylors brand in New Zealand.
In late 2019, Spotless commenced a process to dispose the Laundries business. The process was
interrupted by COVID-19 which also had an impact on the business as described above. However, it did
receive two proposals of which one is currently the subject of ACCC review. As at the date of the report
there remains substantial uncertainty with respect to whether a disposal of the laundries business in part
or full will eventuate, with the ACCC announcing on 27 August 2020 that it has preliminary concerns
with respect to one of the proposals.
3.8 Capital structure and shareholders
3.8.1 Equity shareholders
Spotless has 1,102m ordinary shares on issue. All performance options and rights issued to key
management personnel had expired by 30 June 2020. The substantial shareholders are set out in the
table below:
Table 6: Spotless’ substantial shareholders as at 21 July 2020
Investor Number of shares (m) % of shares issued
Downer 967.8 87.8
Coltrane 130.4 11.8
Other shareholders 3.8 0.4
Total share capital 1,102.2 100.0%
Source: Spotless
As at 21 July 2020, Downer and Coltrane collectively owned 99.6% of the shares of Spotless. On 25
August 2020, Downer announced that Coltrane has accepted the Proposed Takeover and as a result,
Downer now has a relevant interest of 99.6%.
3.8.2 Debt
Debt facilities as at 30 June 2020 are summarised in the following table.
Table 7: Summary of debt facilities
Facility type Margin
Value drawn
($m)
Facility
amount ($m)
Maturity
Syndicated loan facilities 1.5% – 1.8% 720.2 880.2 July 2022 – July 2023
Bilateral loan facilities n/a – 1.5% 50.6 145.6 July 2021 – June 2022
Total 770.8 1,025.8
Source: Spotless
The Group’s borrowing facilities require compliance with a net leverage ratio and interest coverage ratio
set out below:
• Net leverage ratio (Net Debt/EBITDA <3.5x): ratio at 30 June 2020 was 3.4x
• Interest coverage ratio (EBITDA/Interest >3.0x): ratio at 30 June 2020 was 6.9x.
As a result of the COVID-19 pandemic, Spotless management have negotiated a temporary increase to
the leverage ratio.

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 17


The maturity profile of Spotless’ debt facilities (based on debt facilities as at 30 June 2020) is illustrated
in the figure below.
Figure 5: Spotless debt maturity profile ($m)

Source: Spotless
During FY20, Spotless refinanced certain existing facilities which resulted in more favourable terms
including lower interest rates.
3.9 Share price performance
In May 2014, Spotless listed on the Australian Securities Exchange. In March 2017 Downer announced a
takeover, offering cash of $1.15 per Spotless share. Following the close of the takeover offer, Downer
held an 87.8% interest in the ordinary shares in Spotless, and with Coltrane owning 10.6% of the issued
shares, the volume of shares traded on the ASX declined substantially. For this reason, and because of
the administrative costs associated with being a listed entity, Spotless shares were delisted in August
2019.
The daily share price history, trading volumes and performance against the S&P/ASX 200 Index since
listing and up to delisting are presented in the chart below, along with potentially price sensitive ASX
announcements and other events over the period.
Figure 6: Spotless share price relative to Downer and the S&P ASX200 Index

Note: The Downer share price and ASX 200 Index has been rebased to the share price of Spotless following IPO
Source: Capital IQ, Company announcements

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The key price movements in share price and trading volumes, as identified by the numbers in the figure
above, can be attributed to the following events and announcements.
Table 8: Key Spotless announcements
Reference Date Comments
1 23-May-14
Spotless completes IPO at $1.72 per share and implying a market capitalisation of
$2.09bn
2
Oct-14-
July 2015
Announces a number of acquisitions
3 26-Aug-15
250.7m shares traded mainly as a result of the previous owner of Spotless selling
the balance of their shareholding which was escrowed for a period of time following
IPO
4 2-Dec-15
Trading results released, noting that growth from new business had slowed due to
tighter economic conditions and that tender decisions had been delayed or deferred
5 09-Dec-15 Acquired Prime Laundry
6 01-Nov-16 Acquired NovuGroup (Australia) Pty Ltd
7 24-Feb-17
IMF Bentham and William Roberts Lawyers filed a lawsuit in the Australian Federal
Court relating to misleading or deceptive conduct and/or breaching continuous
obligations in relation to the company’s financials for FY15
8 21-Mar-17 Downer announced takeover offer at $1.15 per share
9 1-Jul-17 Acquired Cabrini
10 28-Aug-17 Downer closes takeover offer
11 30-Jun-18
Release of the 30 June 2018 consolidated results, which included information on
contract rationalisation and write-down on the nRAH contract.
12 28-Feb-19 Acquired Envar Group
13 Mar-Aug 19
Coltrane acquired additional shares between March and August, increasing its
shareholding from 10.6% to 11.8%. Given the low liquidity in Spotless shares, this
seems to have driven the share price up
14 30-Aug-19 Spotless delisted from ASX
Source: Capital IQ, Company announcements

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 19


3.10 Financial performance
The financial performance of Spotless for the financial years ended 30 June 2018 to 30 June 2020 is
summarised below.
Table 9: Historical financial performance
$m (unless otherwise stated) Audited FY18 Audited FY19¹ Audited FY20²
Sales revenue 3,044.6 3,025.1 3,038.2
Other income - - 22.0
Cost of goods used (488.3) (483.7) (454.5)
Employee and subcontractor costs (2,125.3) (2,071.4) (2,257.2)
Catering costs (50.2) (43.9) (32.0)
Occupancy costs¹ (24.3) (55.4) (46.1)
Other opex¹ (225.0) (121.2) (197.2)
Operating expenses (2,913.1) (2,775.6) (2,987.0)
EBITDA 131.5 249.5 73.2
Depreciation (89.6) (74.7) (71.5)
Amortisation² (15.8) (15.8) (40.8)
EBIT 26.1 159.0 (39.1)
Net finance income/(expense) (43.4) (39.2) (36.4)
Tax income/(expense) 15.0 (35.8) 22.4
NPAT (2.3) 84.0 (53.1)

Revenue growth 1.3% (0.6%) 0.4%
EBITDA margin 4.3% 8.2% 2.4%
NPAT margin (0.1%) 2.8% (1.7%)
Note:
1. $31.1m was allocated from other costs to occupancy costs above. This is based on the restated FY19 income statement.
This is an allocation difference and there was no change to the FY19 NPAT. FY18 occupancy costs are lower than FY19 and
FY20 as there was no reallocation performed.
2. FY20 includes $26.7m right of use asset amortisation on implementation of AASB 16.
Source: Spotless Annual Reports, Deloitte Corporate Finance analysis
Revenue growth is driven by the level of mobilisation of new contracts offset by exit of existing
contracts, the related pricing terms and inorganic growth through new acquisitions. Sales revenue
decreased between FY18 and FY20, largely due to the following:
• Increase in revenue of 1.3% in FY18 which reflected the first full year of new PPPs and the
acquisition of Cabrini
• Revenue decreased by 0.6% in FY19 reflecting the impact of previously exited contracts, offset by
newly mobilised contracts
• Revenue increased by 0.4% in FY20, due to increased project and contract volumes with
Government and Defence, offset by the negative impact as a result of COVD-19 in particular on
the Hospitality business. As a reflection of the impact of COVID-19, in the first half of FY20
revenue was up 9.1% on the prior corresponding period.
Other income of $22m in FY20 represents Government wage subsidies received in New Zealand to assist
businesses impacted by the COVID-19 pandemic.
Operating expenses mainly comprises employee and subcontractor costs which accounted for an
average of 90% of total operating costs (excluding cost of goods used) between FY18 and FY20.
Lower EBITDA margins in FY18 were due to one-off or non-recurring expenses incurred during the year.
These items are detailed in Table 10 below. After adjusting for these items, the adjusted EBITDA margin
of 8.1% in FY18 is consistent with FY19 adjusted EBITDA margin of 8.1%.

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 20


EBITDA in FY20 was also impacted by various one-off or non-recurring items which totalled $144.1m
1
.
After adjusting for these items, the adjusted EBITDA margin of 7.2% in FY20 is consistent with the
historical periods under review but we note that FY20 excludes lease rental expense due to the
introduction of AASB 16.
There have been no dividends declared or paid since FY17 with excess cash from operations used to
reduce debt levels.
The reported financial performance includes a number of costs that are considered to be one-off or non-
recurring and need to be adjusted from reported EBITDA in order to calculate an adjusted EBITDA, as
summarised in the table below.
Table 10: Adjusted historical financial performance
$m (unless otherwise stated)
Audited
FY18¹
Audited
FY19
Audited
FY20
Notes
Reported EBITDA 131.5 249.5 73.2

One-off/non-recurring adjustments
Contract rationalisation and portfolio
restructure
9.5 - 85.1
1
nRAH write-off 51.4 - - 2
Laundries impairment 40.0 - - 3
Redundancies 9.4 - - 4
Smart metering development 4.5 - - 5
Backpay, redundancy payments and other
related costs
(4.0) (3.8) 15.1
6
Class action - - 34.0 7
Laundries portfolio review - - 5.7 8
Other material items 5.3 - 12.7 9
Government relief - - (8.5) 10
Adjusted EBITDA 247.6 245.7 217.3
Depreciation (89.6) (74.7) (71.5)
Depreciation – ROU - - (26.7)
Adjusted EBITA 158.0 171.0 119.1
Adjusted EBITDA margin 8.1% 8.1% 7.2%
Adjusted EBITA margin 5.2% 5.7% 3.9%
Source: Spotless Annual Reports, Deloitte Corporate Finance analysis
The above adjustments are described below:
1. The execution of the revised strategy resulted in various one-off costs in FY18, including exit costs,
asset write-offs and staff redundancies. In FY20 restructuring adjustments related to onerous
contracts, predominantly in the Resources and Hospitality business units ($2.2m), asset
impairments relating to the restructure of the contract portfolio ($32.3m), stock write-offs relating
to perishable inventory in the Hospitality and Laundries business units ($9.7m), staff redundancies
($23.1m), doubtful debts ($8.6m), and other restructuring related costs, which comprises exit and
unwinding costs attributable to existing contracts ($9.2m)
2. These costs relate to the write-off of work in progress costs in relation to the underperforming nRAH
contract

1
We note that the annual financial statements disclosed individually significant items of $141.1, which has
been calculated in line with accounting conventions. Our calculation of one-off and non-recurring adjustments
is set out below.

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 21


3. Goodwill was impaired by $40m in FY18 due to the underperformance of the Laundries business
4. The response to the takeover by Downer and subsequent management departures in FY18, resulted
in non-recurring costs
5. One-off costs of $4.5m relating to building a smart metering utilities capability
6. Management undertook a compliance review of its Modern Awards and Enterprise Agreements to
ensure that employees had been appropriately remunerated for past work. This review identified
underpayments and resulted in various advisor and other one-off project costs in FY20. Spotless was
also involved in two Federal Court proceedings, which resulted in a court decision for Spotless to
make redundancy and late payment penalties to past employees in FY20. We have also adjusted
FY18 and FY19 to recognise the additional payments that were identified through the course of FY20
7. Class action claims relate to the excess (net of insurance recoveries) to settle the shareholder
action, which commenced against Spotless in the Federal Court of Australia in May 2017. The claim
was previously disclosed as a contingent liability
8. Transaction costs of $5.7m were incurred as part of the potential sale of the Laundries business
9. In FY18 other adjustments relates to the revision of certain balance sheet items. In FY20 other
adjustments include the following:
• renegotiated terms on the nRAH contract which generated a $23m adjustment, offset by a
$7m WIP adjustment on a Health contract (PPP)
• In the Asset and Development Services business a $25.9m write-down of margin for
construction contracts nearing completion
• $2.8m relating to onerous contracts in the Hospitality line of business. These contracts were
not considered as part of individually significant items, as the expected losses have been
driven by the impact of COVID-19.
10. Spotless qualified for wage subsidies from the New Zealand government, to assist the New Zealand
operations during the COVID-19 pandemic. The adjustment represents the amount net of payments
to employees and operational losses.
The FY20 EBITDA (reported and adjusted) stated above, includes the introduction of AASB 16. The
introduction of this standard has resulted in Spotless no longer expensing operating lease rental costs,
which were $29.4m in FY20, but rather expensing depreciation and interest aggregating to $30.3m
which are below EBITDA.
As such, to compare EBITDA relative to prior periods, the Adjusted EBITDA for FY20 would be $187.9m,
reflecting a decrease of $57.8m or 23.5% on the prior period. This decrease can largely be attributed to
the impact of the COVID-19 pandemic, which impacted the Hospitality, Laundries and Asset and
Development businesses.

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 22
3.11 Financial position
The financial position as at 30 June 2018, 30 June 2019 and 30 June 2020 is set out below.
Table 11: Historical financial position
$m
Audited
30 June 2018
Audited¹
30 June 2019
Audited
30 June 2020
Contract assets 377.6 254.3 273.5
Trade receivables 107.3 238.0 221.3
Inventories 29.4 29.5 24.4
Prepayments and other assets 13.4 11.2 11.0
Trade payables (183.2) (244.3) (213.3)
Accruals and other (195.0) (187.8) (328.2)
Contract liabilities (29.0) (54.0) (37.9)
Tax liabilities (4.5) (11.4) (4.0)
Net working capital 116.0 35.5 (53.2)
Equity accounted investments 1.5 1.6 1.2
Right of use asset - - 105.7
Property, plant and equipment 269.3 270.0 249.8
Deferred tax assets and liabilities 55.7 85.7 127.8
Intangible assets, including goodwill 867.4 879.1 849.7
Provisions, net of other assets and liabilities (150.0) (208.4) (149.3)
Total funds employed 1,043.9 1,028.0 1,184.9
Cash and deposits 91.2 109.9 122.9
Derivatives (0.4) (4.9) (8.6)
Borrowings² (823.0) (779.8) (767.5)
Lease liability (3.6) (10.0) (179.9)
Net debt (including lease liabilities) (735.8) (684.8) (833.1)
Net assets 424.1 378.7 298.6
Notes:
1.The FY19 financial position reflects a restated position
2. Includes capitalised borrowing costs
Source: Annual reports and half yearly report
Over the period, net working capital has decreased as a result of one-off items of $88.0m in FY20 largely
relating to various normalisation adjustments as described in Section 3.5 which were accrued at year
end. These include accruals relating to redundancy costs ($28.9m), the shareholder class action
($34.0m), employee underpayment liabilities ($16.9m), resource contract exits ($5.1m) and other
accruals ($3.1m).
Property, plant and equipment relates mainly to the Laundries business and also includes rental stock for
that business.
The adoption of AASB 16 in FY20 resulted in the recognition of a right of use asset of $105.7m and
related lease liability of $179.9m. For the purposes of the analysis above, we have included the lease
liability in net debt.
Net deferred tax assets $127.8m at 30 June 2020, comprises deferred tax assets of $201.9m and
deferred tax liabilities of $74.1m. Deferred tax assets comprises temporary differences of $151.9m and
$50.0m arising from historical tax losses.
Intangible assets at 30 June 2020 comprise goodwill of $774m, customer contracts of $41.4m and
software of $34.3m. Customer contracts are amortised over 6-30 years, whilst software is amortised
over 12 years.

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 23


Provisions mainly relate to employee benefits and onerous contracts, with a smaller portion relating to
make-good, public liability and environmental remediations. In FY20 provisions were impacted by
$10.3m of onerous leases.
Historical contingent liabilities
nRAH contract
In September 2017, Spotless commenced a facilities management sub-contract at nRAH. The sub-
contract was with Celsus, which had a contract with South Australian Government as part of a PPP.
In August 2019, Spotless reached an agreement with both parties in relation to the delivery of services,
which included the following:
• No payment to be made in respect of the historical abatement claims previously disclosed as a
contingent liability by Spotless
• A revised set of KPIs
• An increase in the monthly service fee paid to Spotless
The settlement agreement took effect from 1 July 2019 and as at the date of this report, there were no
liabilities contingent or outstanding, other than the onerous contract provisions discussed above.
Shareholder class action
Spotless agreed to a settlement relating to a shareholder class action in May 2020. The settlement net
of insurance proceeds received, had a $34m impact on FY20 earnings. As at 30 June 2020, payment of
this liability was outstanding, and it was recognised as an accrual on the balance sheet.
Other contingent liabilities
There are no material contingent liabilities. However, certain recent court decisions not involving
Spotless regarding the correct application of various employee entitlements may have a financial impact
on Spotless.
3.12 Strategy of the business and outlook
With the substantial impact of the COVID-19 pandemic on the Hospitality business, the business has
been reshaped to create a standalone Hospitality line of business. A number of multi-discipline facility
management and cleaning contracts were transferred to other lines of business. The balance of the
hospitality contracts, which largely relate to recreation and leisure segments, have then been
restructured to reflect lower demand or put into hibernation.
Within the Health and Education business, FY21 performance is likely to continue to be impacted by
unprofitable contracts. However, over the medium term, contractual terms provide rights to renegotiate
these contracts and thus there is an expectation of an improvement in profitability. Management also
anticipate further revenue growth from new contracts under PPPs and, to a small extent, from the aged
care segment.
Whilst revenues in the Defence and Resources business are expected to drop in FY21 as a result of
exiting Resources contracts, Management foresee growth opportunities in the Government and Citizen
Services and Defence businesses with a number of large opportunities on the horizon with State
Governments and the Department of Defence.
Within the Laundries business, accommodation linen services are expected to recover at a slower rate
than health which started to recover once hospitals recommenced elective procedures. The expectation
is for growth from FY22 onwards, mainly due to a return to pre-COVID levels of accommodation related
linen services and garment rentals.
At a group level, Management anticipates a recovery path that sees the group outperforming FY19
performance by FY23. This reflects a combination of an economic recovery particularly in Hospitality, the
move to profitability through renegotiation of PPP services pricing and further cost savings through
continued removal of smaller, less profitable contracts and efficiencies in management structures.
Notwithstanding the above, we would highlight that as a result of the COVID-19 pandemic, there are
substantial risks. In particular, we highlight:
• Stage 4 lockdowns were imposed in Victoria in July 2020 and a number of events that were
anticipated to be held at Victorian stadiums in FY21 have been cancelled or postponed. Spotless

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 24


has substantial business activities in Victoria (as set out in Figure 4) including the provision of
services at major stadiums such as the MCG
• In the last week of July 2020, a number of employees at one of the laundries in Victoria were
diagnosed with COVID-19 and as a result the laundry was forced to close for 2 weeks
• Lock downs were re-imposed in New Zealand in mid-August 2020. Spotless management were
anticipating growth within the New Zealand business. If the lockdowns continue, the growth
outlook for the New Zealand business may be optimistic.

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 25


4 Valuation of Spotless
4.1 Valuation summary
We have estimated the current market enterprise value of Spotless to be in the range of $1,800m to
$2,100m. After deducting net debt this implies a value of between $0.83 and $1.11 per share.
A summary of our valuation is set out in the following table:
Table 12: Spotless valuation summary
Section Unit Low High
Market multiples approach 4.3 $m 1,700 2,138
Discounted cash flow approach 4.4 $m 1,798 2,043
Enterprise value range (selected) $m 1,800 2,100

Less: net debt 4.5.1 $m (836) (836)
Less: other debt like items 4.5.2 $m (96) (96)
Add: surplus assets 4.5.3 $m 51 51
Equity value $m 919 1,219

Number of shares on issue 4.6 m 1,102 1,102
Value per share $ 0.83 1.11
Source: Deloitte Corporate Finance analysis
In estimating the enterprise value, we have utilised the market multiples and the discounted cash flow
approach. Our rationale for selecting these approaches is set out below in Section 4.2.
In selecting our enterprise value range, we had regard to the following:
• the top end of the market multiples approach is based on estimated maintainable earnings that
could be viewed as high in the current environment with the uncertainties arising from the
COVID-19 pandemic
• with respect to the discounted cash flow approach we recognise that management may seek to
put in place further actions to respond to any further downturn should there be evidence of a
downside scenario eventuating
• In the current environment, there are substantial risks associated with valuations given the
uncertainty and volatility in earnings and cash flows created by COVID-19. This risk is also
apparent in forecasting future cash flows which are utilised in the application of the discounted
cash flow approach.
Having regard to the above factors, we selected an enterprise value range of between $1,800m and
2,100m.
We have reduced the enterprise value for debt and debt like items to arrive at the equity value. These
items are discussed in Section 4.5.
The equity value (which has been assessed on a control basis) has then been translated into a value per
Spotless share based on the number of shares outstanding.
The analysis supporting the valuation assumptions adopted are set out in the following sections.
4.2 Selection of valuation approach and other considerations
We valued Spotless as a whole and did not explicitly consider a sum-of-the-parts valuation. Many of the
facilities services business units are integrated into the broader group and therefore it would be difficult
to derive a ‘stand-alone’ value of each business unit.

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 26


Although the Laundries business unit could be considered separately it is not material to the overall
value of Spotless. We did however undertake a high level analysis of a sum-of-the-parts valuation
(between Laundries and Facility services) in selecting our valuation range.
Appendix 2 provides an overview of the various valuation methodologies which can be adopted in
valuing corporate entities and businesses.
The market multiples approach is typically applied to value businesses which generate a stable level of
earnings. This method involves applying a multiple to an estimated maintainable level of earnings. In
this regard, we note:
• The approach is commonly used by equity research analysts to value similar enterprises
• Based on company disclosures, information and discussions with Spotless management we have
been able to adjust current year earnings for one-off significant items
• There are an adequate number of publicly listed companies with operations sufficiently
comparable to Spotless from which a meaningful comparison can be undertaken and an
appropriate multiple can be identified. We have also identified a recent transaction involving a
business which we consider comparable to Spotless and thereby providing further evidence of an
appropriate earnings multiple.
We also undertook a discounted cash flow analysis having regard to the current business plan developed
by Spotless management and extrapolation of this based on a number of scenarios to recognise the
uncertainty of future earnings posed by COVID-19.
We undertook a number of cross-checks of our valuation, using the revenue multiple approach, and a
comparison to the initial Downer acquisition of Spotless in 2017.
Our valuation of Spotless has been undertaken on a control basis, consistent with the requirements of
ASIC RG111.
4.3 Market multiples approach
Set out below is a summary of our application of the market multiples approach.
Table 13: Spotless valuation summary
Section Unit Low High
EBITDA 4.3.1 $m 200 225
Multiple 4.3.2 times 8.5x 9.5x
Enterprise value $m 1,700 2,138
Source: Deloitte Corporate Finance analysis
We have selected EBITDA as an appropriate measure of earnings because earnings multiples based on
EBITDA are less sensitive to different financing structures, depreciation and amortisation accounting
policies and effective tax rates than multiples based on EBIT or NPAT.
This allows a better comparison with earnings multiples of other comparable companies. In addition,
EBITDA is more commonly and consistently forecast by equity research analysts and thus results in
more accurate implied multiples for the comparable companies which form our market benchmarks.
4.3.1 EBITDA assessment
In selecting the maintainable EBITDA range, we considered the following:
• The historical normalised EBITDA as outlined in Section 3.10. Over the years, Spotless’ reported
earnings have been impacted by a number of significant costs associated with restructurings
undertaken by the company. These costs are not expected to be individually incurred on an
ongoing basis and thus we have adjusted the reported earnings for these costs
• During the second half of FY20, Spotless’ operations were substantially impacted by the COVID-
19 pandemic. In order to maintain consistency with the earnings of the comparable companies
earnings (which were also impacted by the COVID-19 pandemic), we have not normalised for this
impact
• The ongoing contract rationalisation process and cost savings initiatives undertaken by
management, as the business looks to exit less profitable contracts and focus on more
sustainable, larger size and higher margin opportunities

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 27


• A level of cost savings available to market participant buyers of Spotless which recognise the
removal of certain corporate costs associated with being an unlisted public company and having
an independent board and management structure.
Based on the above considerations, we have assessed normalised EBITDA to be between $200m and
$225m. This range is substantially higher than the reported or adjusted EBITDA achieved by the
business in FY20. This range is slightly lower than the annualised EBITDA for the first half of FY20 and
accordingly recognises the impact of the COVID-19 pandemic on earnings.
4.3.2 Selection of earnings multiple
In selecting an appropriate earnings multiple, we have considered earnings multiples observed from
share market trading of listed companies with operations comparable to Spotless and the implied
earnings multiples paid to acquire companies with operations comparable to Spotless.
Earnings multiples derived from share market trading do not reflect the market value for control of a
company as they are based on portfolio holdings in the subject companies. The difference between the
market value of a controlling interest and a minority interest is referred to as the premium for control.
The owner of a controlling interest has the ability to do many things that the owner of a minority interest
does not. These include:
• Control the cash flows of the company, such as dividends, capital expenditure and compensation
for directors and managers
• Determine and change the strategy and policies of the company
• Make acquisitions, restructure the business or divest operations
• Control the composition of the board of directors.
Australian studies indicate the premiums required to obtain control of companies range between 20%
and 40% of the portfolio holding values. However, such premiums often mask other factors outside of a
pure premium for control such as low profitability and payment for synergies.
The acquisition price achieved in mergers or acquisitions of companies (particularly where control is
transferred) represents the market value of a controlling interest in that company. However, the same
issue also exists with respect to transactions in that the implied multiple could be calculated on low
profitability and could reflect payment for synergies.
4.3.3 Selection of comparable companies and transactions
Market trading multiples
We conducted a global search for companies comparable to Spotless and identified a small number of
listed companies that are comparable to Spotless.
Our comparable company group includes Downer as its earnings include Spotless (25% of Downer’s
revenue) and also because it undertakes other activities that are similar to those of Spotless. We also
identified a number of other facility services providers in other geographic markets, a number of which
have operations in the Australian market.

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 28


Set out in in the figure below are the implied EBITDA multiples of the companies we identified.
Table 14: Summarised comparable companies’ financial and valuation metrics
Company
LTM
1
EBITDA
($m)
EBITDA margin
(current)
Revenue
growth
2
(current)

EBITDA
multiples
(current)
Downer
669 7.0% 4.7% 5.5x
Facility services

ABM
454 5.4% 2.6% 9.8x
Compass
3,920 8.2% 7.3% 13.0x
GDI
75 6.7% 8.9% 10.3x
ISS
605 5.6% 4.6% 7.8x
Mitie
201 5.3% (2.6%) 5.0x
Sodexo
2,672 6.5% (7.6%) 10.5x
Note:
1. LTM = last twelve months
2. Growth implied by the revenue for the financial year ending June 2021 (or closest full year results announcement)
Source: Capital IQ, Annual Reports, Company Announcements, Deloitte Corporate Finance analysis
A full list containing the description and details of the comparable companies considered in our analysis
is provided in Appendix 3.
In our analysis we have aligned the financial years of the comparable companies with (to the extent
possible) the financial year of Spotless. We consider this important in the current environment as the
COVID-19 pandemic largely started impacting the countries the companies operate in from March 2020
onwards. As such, where companies have substantially different year ends, the impact on their business
operations and reported earnings of the COVID-19 pandemic needs to be considered.
In assessing the comparability of these companies, we have had regard to the following key factors:
• Business model: whilst there are no directly comparable listed companies in the Australian
market, a number of the companies we identified have operations in facilities, construction,
utilities and hospitality services. We have also had regard to Downer, as this provides a guide on
investor sentiment in the Australian market as Spotless represents about 25% of Downer’s
consolidated revenue
• Growth prospects: companies with a higher growth outlook generally trade at higher multiples
than those with lower growth prospects. We have observed that the comparable multiples are
correlated with revenue growth as this is reflective of the expectation of increased market share
and growth opportunities
• Diversification and scale: Companies with greater product and/or geographic diversification
(which also tend to be larger) can, all things being equal, trade on higher multiples than smaller
companies. This is because the product and geographic diversification can mean that the
business is more insulated from specific risks (which may only impact a particular product or
geography) or because their larger size gives them a scale advantage (for example, the
opportunity to tender for large public and private sector contracts)
• EBITDA margin: companies with higher margins tend to trade at higher multiples as these
companies tend to have more pricing power in the market, and/or have greater capacity to
absorb higher costs which may be imposed on the business. The higher margins can also be
viewed as a proxy for higher returns and thus businesses with higher margins would be more
valuable.
Of the comparable companies identified, we consider ABM, GDI and ISS to be most comparable due to
their focus on facilities management offerings and similar contract portfolios servicing a broad mixture of
public and private sector clients. More specifically:
• ABM is a large company in the United States facilities services market and inherently has access
to a larger addressable market (the United States) and growth regions than Spotless. It has
recently pursued an aggressive growth strategy through acquisitions aimed at growing earnings in
the short to medium term. ABM has an increasingly diversified offering across general facilities
management and specialist technical services. ABM is larger than Spotless with revenue of c. $9b
compared to Spotless revenue of c. $3b. ABM and Spotless have similar historical and current

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 29


EBITDA margins ranging between c.5% and 7%. Over the last 3 years ABM’s revenues have
grown by a CAGR of 15.1% whilst Spotless’ revenues have been stable. Given these factors, we
would expect ABM to command a higher multiple than Spotless. ABM trades at a current EBITDA
multiple of 9.8 times
• GDI is an outsourced facility services provider, operating predominately within Canada and the
United States. GDI targets a larger addressable market than Spotless with access to markets
across North America with a more diversified offering across both janitorial facilities services and
specialist services. GDI is smaller than Spotless, although growing rapidly, with revenue growth
averaging 15% p.a. over the last 5 years. GDI’s current EBITDA margin is similar to Spotless at
c.7%.On balance we would expect GDI to be more attractive than Spotless. GDI trades at a
current EBITDA multiple of 10.3 times.
• ISS is a large global leader in facilities services, with extensive operations across Europe, the
Americas and Asia Pacific (including Australia). ISS is significantly larger than Spotless with
revenue c. $17.4b and EBITDA of c. $1b. Growth has stagnated in recent years and broker
consensus has forecast revenue growth of c.4-6%over the next two years. ISS has a larger
laundries segment relative to Spotless and also offers waste management solutions, which results
in high capital requirements relative to Spotless. Businesses with higher capital expenditure
requirements generally trade at lower multiples to businesses which have greater cash conversion
from earnings. For these reasons we expect ISS to trade at a lower multiple to Spotless. ISS
trades at a current EBITDA multiple of 7.8 times
• Downer is the parent company of Spotless and is also a competitor in its own right with a
diversified service offering across long-term government and private sector contracts. Downer is
significantly larger, generating revenue of c. $12.7b. Downer’s aggregate current EBITDA margin
is similar to Spotless at c.7%. However, Downer has a more capital intensive business than
Spotless, with a large portion of its revenue derived from mining services which requires
significant capital. For this reason we would expect Downer to trade at a lower multiple to
Spotless. Downer trades at a current EBITDA multiple of 5.5 times.
The remaining comparable companies have either a different core focus or service offering mix to
Spotless. Compass and Sodexo primarily focus on hospitality and catering whilst Mitie has a more
broadly diversified offering across facilities, energy and infrastructure services. On this basis, we have
observed but placed less reliance on their implied earnings multiples in our assessment of an appropriate
earnings multiple for Spotless. In particular, we note:
• Compass and Sodexo are large multi-national businesses which are significantly larger than
Spotless, with these companies having recently experienced increased earnings volatility due to
the impact of the COVID-19 pandemic on their large-scale catering and hospitality offerings.
These companies are currently operating under restrained trading conditions with a large portion
of their businesses in a state of hibernation, reducing meaningful conclusions in relation to their
trading multiples. With these depressed earnings, Compass and Sodexo trade on current
multiples of 13.0 times and 10.5 times, respectively
• Mitie provides a broad range of engineering, construction and facilities management offerings.
Due to Mitie’s offerings being more capital intensive and the business achieving lower margins
than Spotless. Mitie trades at a current multiple of 5.0 times.
Comparable transaction multiples
Transaction multiples are generally calculated with reference to historical earnings and, as a result, all
things being equal, we would expect the transaction multiples (particularly where control is transferred)
to be higher than the unadjusted current or forecast trading multiples observed for listed comparable
companies.
We identified a number of transactions involving businesses similar to Spotless. However, all of the
transactions involving similar companies we identified pre-dated the COVID-19 pandemic. In addition,
with the exception of the Broadspectrum acquisition, the comparable transactions occurred before the
implementation of AASB 16, which further reduces the comparability of the implied transaction
multiples.
Broadspectrum was acquired earlier this year by Ventia and the price paid implied a multiple of
6.1 times EBITDA. Their business operations are comparable to Spotless. Although the transaction was
announced before the outbreak of the COVID-19 pandemic, the transaction closed in June 2020, and as
such we have assumed the final consideration paid incorporates the additional risk associated with
COVID-19.
Broadspectrum has adopted AASB 16 and the EBITDA was calculated reflecting AASB 16.
Broadspectrum’s operations are more capital intensive than Spotless and therefore is likely to trade at a
lower multiple.

Spotless Group Holdings Limited - Independent expert’s report and Financial Services Guide 30


The EBITDA utilised for the purpose of implying the Broadspectrum transaction multiple was for the year
ended 31 December 2019, and therefore does not include any impact of the COVID-19 pandemic
(although given Broadspectrum doesn’t have exposure to the hospitality sector and the laundries sector,
the impact on its earnings is likely to be less). A multiple based on earnings impacted by COVID-19
would be higher.
4.3.4 Selected multiple
Based on our analysis of the comparable companies and transactions outlined above, we have adopted
an EBITDA multiple (on a control basis) in the range of 8.5 times to 9.5 times for the following reasons:
• With the exception of the Laundries business, Spotless has relatively low capital and working
capital requirements
• Spotless has a relatively small hospitality and laundries business and therefore has not been as
adversely impacted by COVID-19 in comparison to some of its global peers with high levels of
exposure to these segments
• Spotless, an exclusively Australian and New Zealand business does not have the same
opportunities for growth in comparison to predominately global based companies. These
companies have access to greater growth opportunities and a larger addressable market across
Europe, Asia, and North America. This has been counter-balanced against the scale and brand
Spotless has in the Australian market which allows it to actively participate in large scale
government, defence and PPP contracts.
4.4 Discounted cash flow approach
We have also assessed the enterprise value using the discounted cash flow approach having regard to
the current business plan developed by management
The discounted cash flow approach estimates enterprise value by discounting a company’s future cash
flows to their net present value provided that the future cash flows that are expected to be derived from
a business are capable of being estimated with a reasonable degree of confidence.
The discounted cash flow method requires the determination of the following:
• future cash flows based on a range of revenue and earnings scenarios which may be achievable
over the next 5 years
• an appropriate discount rate to be applied to the future cash flows
• an estimate of the terminal value growth rate.
Our considerations on each of these factors are presented below.
4.4.1 Future cash flows
Management prepare a budget for the following financial period, which goes through a detailed review
and approval process. The budget is prepared for each of the seven key lines of business, from input
from each of the line of business heads. Management have also prepared high level forecasts for FY22
and FY23 accompanied by more detailed forecasts for the Hospitality line of business.
Set out below are the key considerations in management’s development of the forecasts:
• The impact of COVID-19 has been considered for each line of business, leveraging the work
undertaken by management in determining the budget and plan for the restructured Hospitality
and Laundry businesses
• Due to the significant impact that COVID-19 had on the hospitality business, this analysis was
undertaken at a more granular level
• The forecasts reflect a gradual recovery of the Laundries business, with a return to pre-COVID
activity levels over the course of FY21
• Defence, Government and Health and Education business units are expected to be relatively
unaffected by COVID-19, with some growth as a result of Government stimulus efforts in FY21.
There is also an expectation of opportunities materialising for PPPs in healthcare, additional
defence facilities contracts such as base refreshers and infrastructure maintenance and new
Government contracts for the various state Justice and social housing departments
A summary of those forecasts is set out below:

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• Revenue is budgeted to decrease in FY21, primarily as a result of the impact of the COVID-19
pandemic on the hospitality business and the laundries business, but also the exit of a number of
low margin contracts. This decline is expected to turnaround in FY22 and FY23
• Despite the lower revenues in FY21, the EBITDA margin is anticipated to increase as a result of
the restructuring that has already been undertaken to combat the impact of the COVID-19
pandemic and also because of the exit of a number of low margin contracts. Together with the
growth in revenue, this growth in EBITDA margin is expected to continue into FY22 and FY23
The forecasts require some adjustments in order to be used as the basis of a discounted cash flow
methodology including:
• We extended management’s 3-year forecasts for a further 2 years, which we considered sufficient
to capture the new strategic initiatives identified by management over the next 5 years, followed
by a reversion to a long-term growth rate into perpetuity
• Capital expenditure is expected to be broadly in line with forecast depreciation and amortisation
and is based on a consistent % of revenue (2.5%)
• Working capital is based on a proportion of forecast revenue (1.2%), after considering a
normalised historical net working capital
• We adopted an effective tax rate of 30%, which is consistent with historical effective tax rate and
aligns with the Australian corporate tax rate.
4.4.2 Terminal growth rate
We have estimated a terminal value at the end of the forecast period using the perpetuity growth
formula. A long-term growth rate of 2.0% p.a. has been adopted having regard to long term inflation
rates in Australia and the outlook for the sector.
4.4.3 Discount rate
The discount rate used to equate the future cash flows to a present value reflects the risk adjusted rate
of return demanded by a hypothetical investor. We have selected a base case nominal after tax
discount rate in the range of 8.5% to 9.5% to discount the future cash flows to their present value. In
selecting these discount rates we considered the following:
• the required rate of return of comparable companies
• the debt to equity ratio of comparable companies.
We also used the CAPM as a frame of reference for the calculation of these rates and used the following
inputs in applying the CAPM:
• a cost of equity of 9.5% to 11.8% based on:
− a risk free rate of 0.9% based on the five day average of the zero coupon ten year Australian
government bond
− an equity market risk premium of 8.3%
− a levered beta of 1.04 to 1.20.
• a net debt to enterprise value ratio of 15% to 25%
• a pre-tax cost of debt of 5.0%
• a corporate tax rate of 30%.
This discount rate is at the low end of the range currently being used by equity research analysts for the
comparable companies.

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4.4.4 Conclusion on DCF valuation
In the current environment, with the possible impacts of the COVID-19 pandemic and in particular
further spikes in infections such as those evidenced in Victoria and New Zealand, there is substantial
uncertainty concerning the preparation of cash flow projections. One approach to reflect that uncertainty
would be through the application of a risk premium in the discount rate.
An alternative approach would be to consider a variety of scenarios with a probability weighting to those
scenarios. We consider this approach more appropriate and accordingly, have set out below the various
scenarios we considered:
• Scenario 1: Base case based on management’s projections
• Scenario 2: Downside scenario which is based on management’s base case but assumes lower
revenue growth in FY22 and that revenue growth tapering down at a faster rate to 2% in FY25.
The scenario also assumes consequential impacts on margins. This reflects a more conservative
facilities services market growth outlook and would not be viewed as unreasonable if the recovery
out of the COVID-19 pandemic is more subdued than currently anticipated
• Scenario 3: Upside scenario which is based on management’s base case but assumes higher
EBITA margins reflecting the benefit of continued cost saving and contract rationalisation benefits.
We also assume higher revenue growth to reflect the more aggressive industry growth forecasts
in the defence, health and education sectors, which are all key growth areas for Spotless.
The results of this analysis are set out below.
Figure 7: Discounted cash flow valuation (enterprise value) ($m))

Source: Deloitte Corporate Finance analysis
Given the level of work undertaken by management in the development of the forecasts but also
recognising that since the development of the forecasts there have been some adverse developments as
a result of the COVID-19 pandemic we consider it reasonable to apply a weighting of 40% to Scenario 1
(base case) and Scenario 2 (downside) and 20% weighting to Scenario 3 (upside).
The resulting enterprise value using the discounted cash flow approach is $1,798m to $2,043m.
4.5 Equity value
4.5.1 Net debt
To assess the equity value, we have reduced the enterprise value by net debt and other debt like items
expected at the time of completion.
As at 30 June 2020, the net debt of Spotless as recorded in the statement of financial position was
$833m including lease liabilities of $179.9m. This included c.$3m of capitalised borrowing costs which
we have adjusted to arrive at a net debt of $836m.
1,0001,2001,4001,6001,8002,0002,2002,4002,6002,8003,000
Scenario 1- base case
Scenario 2- downside
Scenario 3- upside

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4.5.2 Debt-like liabilities
As noted in Section 3.11, Spotless has other liabilities which are related to historical matters and are
debt-like in nature. These are set out in the table below:
Table 15: Debt-like liabilities
$m
Debt-like
liabilities
Labour related accruals (48)
Shareholder class action (34)
Contract exit costs (5)
Onerous contracts, leases and other make-good provisions (8)
Other (1)
Debt-like items (96)
Source: Deloitte Corporate Finance analysis
Labour related accruals largely relate to staff redundancy and back-pay not yet paid at year end
Shareholder class action relates to the excess over that covered by insurance.
Onerous contracts, onerous leases and other make-good provisions relate to costs associated with the
ongoing contract rationalisation and restructure process.
Other liabilities relate to costs associated with the recent demobilisation of the Hospitality business unit
due to COVID-19 and other residual debt-like accruals identified by Management.
4.5.3 Surplus assets
Assets not captured by our enterprise valuation, comprise the following:
• Deferred tax asset of $50.0m related to past tax losses. Management anticipate being able to
utilise these losses in FY21. Thus the impact of present value on these losses would be
immaterial and we have therefore selected the undiscounted value
• Equity accounted investments of $1.2m, relating to interests in jointly controlled entities
4.6 Shares outstanding
As noted in Section 3.8.1, Spotless has 1,102.2m fully paid ordinary shares on issue.
4.7 Valuation cross-checks
4.7.1 Revenue multiple cross-check
We also cross-checked our valuation by reference to revenue multiples, as set out in the table below.
Table 16: Revenue multiples cross-check
Section Unit Low High
Selected enterprise value range 4.1 $m 1,800 2,100

FY20 revenue 3.10 $m 3,038 3,038
Implied revenue multiple $m 0.6x 0.7x
Source: Deloitte Corporate Finance analysis
Whilst revenue multiples do not account for different cost structures in businesses and thus, in our
opinion, for a business like Spotless can only be used as a cross-check, they form a useful cross-check in
the current environment given the impacts of the COVID-19 pandemic and the introduction of IFRS-16
on profitability.

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The revenue multiples implied by our valuation are within the range of the revenue multiples observed
for the listed comparable companies (as set out in Appendix 3) and therefore we consider this supported
our assessed valuation range.
4.7.2 Comparison to 2017 Downer acquisition
The implied EBITDA multiple in the initial Downer acquisition in 2017 was 7.7x (Table 22) compared to
c.8.7x as implied by our valuation
2
. Whilst the multiple implied by our valuation is higher than that
offered by Downer in 2017, we consider this multiple reasonable given FY20 earnings have been
impacted by the COVID-19 pandemic.


2
Multiples have been calculated on a pre-AASB 16 basis to ensure comparability

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5 Valuation of the Consideration
5.1 Value of the Consideration
The Consideration consists of two components, cash and a DCSO, as set out below.
Table 17: Valuation summary of the Consideration

Consideration per Spotless share
Component Low High
Cash $1.00 $1.00
DCSO
1
$0.07 $0.12
Total $1.07 $1.12
Note:
1. Represents the value of DCSOs that one Spotless share is entitled to
Source: Deloitte Corporate Finance analysis
We have assessed the market value of the DCSO as follows.
5.2 Selection of valuation methodology
We have assessed the fair market value of the DCSO using a Monte Carlo simulation model which
simulates future share prices according to a probability distribution assumption. After a large number of
simulations, the arithmetic average of the outcomes, discounted to the valuation date, is calculated to
represent the option value. Monte Carlo simulations are appropriate to value options which are subject
to complex hurdles like the DCSO.
We have also cross-checked the outcomes from this model to the use of a variety of analytic models
(various mathematical formulae that have been developed by researchers to value such options).
5.3 Inputs to our valuation of the DCSOs
Summarised below are the key valuation inputs adopted and the basis of selection of those inputs.
Table 18: Monte Carlo valuation inputs
Input Value Basis
Risk free rate 0.37% 4 year zero coupon government bond yield
Downer share price $4.30 5 day volume weighted average price
Forecast dividend per share FY21 - 17c
FY22 - 24c
FY23 - 26c
FY24 - 28c
We have used annual estimates of dividend per share for
Downer as opposed to a uniform dividend yield over the
period of the options as the expectation is that the dividends
per share will vary over time
In forming a view on the estimate for each year, we had
regard to consensus broker projections
Volatility 25% to 35% We analysed the share price volatility of Downer and the
various other comparable companies over the last 1, 2, 3 and
4 years.
This analysis is presented in Appendix 5.
The more recent share trading has exhibited greater volatility
because of the impact of COVID-19 and thus the volatility
rates are higher. Over the long-term we do not expect such
high volatility rates to persist. We also placed greater weight
on the volatility of Downer shares as the DCSOs are linked to
them. As a result, we selected volatility rates of 25% to 35%
Term 4.0 years The terms of issue of the DCSOs allow Non-Associated
Shareholders to exercise the options over a period of 4 years
(subject to the Target Prices being achieved). If the Target
Prices are not achieved at the end of the 4 years, the DCSOs
will expire
Exercise price Nil The terms of issue of the DCSOs do not require holders to pay
an exercise price

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Input Value Basis
Target price:
- Tranche 1
- Tranche 2
- Tranche 3

$6.382
$6.873
$7.364

The terms of the DCSOs require Downer’s share price to have
exceeded certain target prices in order for the options to be
exercisable
Source: S&P Capital IQ, Broker reports, Bidder’s Statement, Deloitte Corporate Finance analysis
5.4 Conclusion as to the valuation of the DCSOs
Summarised below is the range of values arising from the Monte Carlo simulation:
Table 19: Monte Carlo values
Item Value
Low High
Tranche 1 $1.57 $2.30
Tranche 2 $1.25 $2.12
Tranche 3 $0.99 $1.79
Value of one DCSO
1
$1.27 $2.07

DCSOs issued per Spotless share 1 DCSO issued per 17.92741 Spotless shares

DCSO value per Spotless share $0.07 $0.12
Note:
1. Assumes that the value of a DCSO will be split equally between the tranches
Source: Deloitte Corporate Finance analysis
Each tranche has a different value because the target price for conversion as set out in Section 5.3
above is different and thus the probability of holders being able to exercise the option differs.
Non-Associated Shareholders are entitled to 1 DCSO for every 17.92741 shares held by them and as
such the value of a DCSO for every Spotless share has been assessed to be in the range of $0.07 to
$0.12 per share. Our analysis assumes that a Non-Associated Shareholder will receive an equal
proportion of the three tranches listed above.
We note that the value of the DCSO, assuming all target prices are achieved immediately, is $0.41 per
Spotless share. This implies a probability weighted likelihood of DCSOs vesting of between 17% and
27%. Noting the current share price of Downer and the target prices we consider such a probability
reasonable.
Non-Associated Shareholders will need to have regard to their own risk tolerance and other factors
specific to them in order to form a view on the value of the DCSOs to them, in particular, in light of the
fact that the DCSO will not be capable of being traded on a securities exchange.

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Appendix 1: Key industry themes
Spotless holds a strong market position
The market position of Spotless relative to its competitors in the Australian / New Zealand market is
summarised in the figure below.
Figure 8: Last reported Aus/NZ annual revenue Figure 9: Australian facility services market
share

Notes:
Revenue based on last reported financial year
Source: Financial reports, Capital IQ, IBISWorld, Deloitte Corporate
Finance Analysis
Notes:
Compass not included by IBISWorld as it operates in the food
segment and not the facilities services segment
Source: IBISWorld, Deloitte Corporate Finance Analysis
Spotless has leading market positions in the sectors in which it operates. Notwithstanding, the Australian
facility services market is highly fragmented and consequently, is highly competitive.
The impacts of COVID-19 have been varied but in a number of segments significant
The impacts of COVID-19 have varied across different segments within the facilities services industry.
Government, defence, health, and infrastructure development industries have been largely unaffected,
with many being considered ‘essential services’ and government departments moving ahead with
planned and new projects in order to promote economic activity. The education sector has been affected
by closures, a drop in international student numbers, and a transition to remote-based learning, all of
which have a flow-on effect to spending on facility services.
The hospitality/catering services sector has been substantially affected by government restrictions that
have resulted in the cancellation of major events and functions across Australia from March 2020. Whilst
restrictions eased in June 2020, a second round of restrictions in July/August 2020 is introducing
additional uncertainty to the sector. Some relief has been provided to affected operators through
government stimulus, including the Job Keeper package, which is intended to assist businesses retain
their staff. This is likely to have a reduced impact in the catering services sector however, as casual staff
and contractors who have worked for less than 12 months are not eligible. Furthermore, certain
employers who do not meet the Government’s eligibility criteria, due to factors such as the size of the
business, will not receive support, as is the case for Spotless.
The industry has been impacted by increasing regulation with respect to employees
Regulatory frameworks dictate the standards to which services are performed, as well as minimum
levels of qualifications for staff, and occupational health and safety requirements. Given companies in
these industries spend the largest proportion of their operational costs on workers and contractors,
occupational health and safety regulations have a substantial effect on businesses operating within the
industry. The impact of the COVID-19 pandemic is expected to increase the onus on operators to
provide appropriate staff training in hygiene standards and protocols which will increase operating costs.

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Under the Modern Slavery Act 2018 large Australian businesses are required to report on the mitigation
of modern slavery risk factors throughout their supply chains. The New South Wales state government
has also established its own version of the act which was originally set to come into force on 1 July
2019, however has since been delayed for further consideration. Under this legislation industry players
must ensure that materials used when rendering services were not produced through modern slavery
conditions.
A large proportion of the Spotless workforce is employed casually or via subcontractor arrangements.
There are certain risks arising with this model. Due to the nature of the work, high staff turnover is an
issue across the industry. This reduces operational efficiency, impairs knowledge sharing and may lead
to higher recruitment costs. On the other hand, there is a risk that long-term contractors and casual
employees may be seen as permanent employees and be entitled to additional benefits such as
superannuation and paid leave, and also be captured in employee numbers for the purposes of
calculating obligations such as payroll tax. For workers that are considered employees, the industry is
highly represented by unions, or otherwise captured by the requirements of industry awards or union-
negotiated Enterprise Agreements. Negotiation with unions on new Enterprise Agreements and/or a
response to industrial action can be time consuming and costly, and has the potential to expose the
company to risks to the extent that the company’s ability to provide its services to customers is
inhibited.
Contractual arrangements are changing
There has been a shift in the industry toward longer-term, structured arrangements in education,
defence and healthcare sectors. Industry operators are increasing the breadth of services offered, to
accommodate the expanding needs of customers. This has been evident at companies such as Spotless,
which undertook a contract rationalisation and simplification programme in 2016 and has also been a
focus of its competitors.
As a consequence, preferred contracts are longer-term and more comprehensive in nature, and attract
higher margins because expenses can be more easily managed when part of a larger offering. While this
is seen as a benefit from many perspectives, these “full service” contracts can require early stage
commitments, equity participation in some cases and may leave participants exposed to additional risks
due to potentially unforeseen circumstances, especially over longer term contracts when there may be
an expectation that consortium partners will collectively be responsible for contract breaches or reported
issues.
The industry outlook over the long-term is positive
As a result of the impacts of COVID-19 (as described above), financial performance within the catering
services sector is expected to decline significantly in FY21 followed by a slow recovery from FY22 to
FY25 as restrictions ease and business confidence and consumer sentiment improves.
3

More generally, in the short term, the number of businesses in Australia is expected to decline, partially
due to exits of businesses that face difficulties during the COVID-19 crisis. Negative real GDP growth,
declining household disposable and discretionary incomes, and negative consumer sentiment and
business confidence are projected to discourage new business creation while negatively affecting the
viability of existing businesses. These factors are expected to moderate growth within the broader
facilities management industry over the short term.

3
Australia Industry (ANZSIC) Report H4513, IBISWorld