Believe it or not, Transpacific Industries Group (TPI), the Australian waste management company, has managed to wring a small gain out of its New Zealand foray into the waste business by selling the business to a Chinese buyer.
The near $A900 million deal will allow Transpacific to consider resuming dividend payments to shareholders who have not been receiving any income for a couple of years.
The deal, announced yesterday, came at the end of a bidding process which saw the private equity group, Carlyle, competing with the Chinese company and a group of Maori tribes.
An unnamed fourth bidder was claimed to be involved in the process which saw bids close last Friday and the result announced yesterday morning. TPI hired Deutsche Bank last October to advise on the sale of its New Zealand operations, so it could focus attention on its more profitable Australian business.
The winning offer was made by Beijing Capital Group for $NZ950 million ($A896.27 million). On paper there’s a small profit, but in reality it has been a costly experience for TPI.
TPI 1Y – Transpacific sells NZ business to Beijing Capital
The company was previously known in NZ as Waste Management and was taken over by Transpacific for $NZ870 million in 2006.
The deal came at the wrong time because the GFC started happening the next year and Transpacific was caught with too much debt after also buying Australian rival Cleanaway in 2008 for $A1.25 billion (from private equity group, KKR).
The debt taken on to finance the two deals almost sank the company, as did the economic slowdown which hit after the GFC, especially in NZ.
TPI wrote down the value of the New Zealand business by $A188 million in 2011.
TPI said in yesterday’s statement that, "Beijing Capital Group, a long standing member of China’s Top 500 Enterprises, is one of China’s leading State owned infrastructure enterprises with specialist expertise in water treatment, waste management, mass transit, railwayand tollroads. In addition,Beijing Capital Group is one of China’s most prominent real estate developers.
"Beijing Capital Group had in December 2013 total assets and revenues exceeding US$21 billion and US$3.7 billion respectively and employs around 20,000 people across its regional and international businesses."
Now TPI says it will concentrate on boosting returns from its Australian business.
TPI said the "proceeds from the sale will allow it to redeem the Step-up Preference Securities (ASX:TPAPA), refinance its syndicated debt facility and fund future investments with a strong capital base".
"The Company will also consider the resumption of dividends in the near term," directors said.
Robert Boucher, the CEO of Transpacific, said, “The sale of our New Zealand business gives Transpacific increased financial flexibility.
"We will look to enhance our Australian waste management businesses, capture long term growth opportunities and generate improved shareholder value."
In yesterday’s jittery market, the news passed without much reaction – the shares rose 0.4% to $1.18.
In reality TPI is yet another Australian company that has wasted a lot of money (well over $2 billion) on acquisitions here and offshore.
Actually its shareholders are three time losers – losses on deals in Australia and NZ and the loss of dividend income.
