(Refiles to add dropped letter in first paragraph)
* Company says offer too low; shares rise to one-year high
* Spotless directors to take no further action on proposal
* Pacific Equity Partners controls more than 19 pct of Spotless
* Pacific Equity Partners seeking talks with Spotless board
SYDNEY, Nov 17 (Reuters) - Australian services firm Spotless Group on Thursday rejected its second takeover offer since May, saying the A$698 million ($709 million) bid from Pacific Equity Partners was too low, a move that pushed the buyout firm to seek talks with the board.
Spotless in a statement said its directors intended to take no further action on the proposal, signalling a higher offer could open the door for negotiations.
Spotless shares rose to a 12-month high of A$2.50 in early trade, but trimmed gains to trade 1.7 percent higher at 0130 GMT.
“We are well prepared and willing to develop a compelling offer to shareholders and, with a reasonable level of engagement, we could move quickly to turn our proposal into a binding offer,” a spokesperson for Pacific Equity Partners said in a statement following the rejection. “We hope to be able to engage with the Board on this basis.”
Pacific Equity Partners has entered into pre-bid agreements with certain shareholders for 19.64 percent of Spotless. Pre-bid shareholders include Investors Mutual Ltd, Lazard Asset Management and Orbis Investment Management, it said.
Spotless is tightly held, with 10 fund managers holding 61 percent of its shares.
Spotless, which provides services including cleaning, security, and catering, said that the offer did not reflect the fundamental value of the company.
The offer comes six months after Spotless rejected a A$657 million offer from U.S. buyout giant Blackstone Group.
The latest proposal was pitched at A$2.63 a share, a 12 percent premium to the last trade in Spotless. Its shares closed on Wednesday at A$2.35, up 20 percent this month on speculation that a fresh bid was in the works.
The offer assumes no further dividend would be paid until a successful deal is concluded and the proposed timetable showed the deal would not be complete before the record date for interim dividend, Spotless said.
Spotless is expected to pay a dividend of about 5 cents in February.
The bid is being backed with financing from banks including Citigroup, Investec, Australia and New Zealand Banking Group and HSBC.
Pacific Equity Partners was planning to use the commitment letters from the banks to approach investors before going to the Spotless board with its proposal, two sources had previously said.
Pacific Equity Partners is advised by Citigroup and Investec. Spotless is advised by Goldman Sachs and Clayton Utz.
$1 = 0.984 Australian dollars Reporting by Narayanan Somasundaram; Additional reporting by Sonali Paul in Melbourne; Editing by Ed Davies