revisiting investment thesis, page-22

Transpacific sells NZ arm to Beijing Capital

March 4, 2014
Tim Binsted and Sarah Thompson


Transpacific Industries chief executive Bob Boucher said the sale of its New Zealand waste management business to Beijing Capital Group for $NZ950 million ($890 million) had bolstered the balance sheet.

He also said he wanted to drive the company's revenue growth with strategic acquisitions and by competing more aggressively.

Many analysts regarded the New Zealand operation as Transpacific's best asset. Mr Boucher, who took up the top job in October, said BCG had bought a quality business.

"It's certainly been a strong performer for us but we, in turn, have a lot of confidence in our existing management team to enhance our business here in Australia," he said.


BCG is a Chinese state-owned infrastructure enterprise focused on water treatment, waste management, railway and toll roads and real estate development.

It has $US3.7 billion ($4.15 billion) in revenue, employs 20,000 people and has $US21 billion in assets. The Transpacific deal is its first major purchase outside China and illustrates the attractiveness of Australia and New Zealand to Chinese companies.

The group operates a large landfill in China and is a leader in China's solid waste sector.

BCG chief executive Wang Hao said the company would be able to leverage the technological knowledge and operational expertise from the New Zealand operation and bring it back to the Chinese market.

"The investment carries significant and mutual technical and commercial benefits … BCG believes substantial scope exists for cross border co-operation given the technical knowledge base of TPI NZ Management in areas such as landfill and local area environment management," he said.

The sale is expected to generate earnings of about $NZ110 million for the full-year, representing a sales multiple of 8.6 times.

Hong Kong-listed CKI Infrastructure paid a multiple of 8.5 times EBITDA when it bought New Zealand's second biggest waste operator EnviroWaste for $NZ500 million last year.

ASX-listed Transpacific Industries has been in the midst of a lengthy turnaround process. It has been through a strategic review and Mr Boucher is streamlining operations, divesting non-core assets to simplify the business and slash debt.

Proceeds from the sale will be used to redeem Transpacific's $250 million worth of step-up preference securities and to refinance its syndicated debt facility. The company is also considering paying dividends again.

After final bids closed on Friday, Mr Boucher flew to Hong Kong on Saturday and put pen to paper on Sunday, leaving bankers and lawyers scrambling.

Transpacific shares closed 0.4 per cent higher on Monday at $1.78, a 2½ year high.



Read more: http://www.smh.com.au/business/transpacific-sells-nz-arm-to-beijing-capital-20140303-340gf.html#ixzz2uwtP8VBw