Transpacific to sell NZ waste management to Beijing Capital Group for $950m
Transpacific Industries Group [NZX: TPI], the Australian waste management company, agreed to sell its New Zealand business to Beijing Capital Group for $950 million, raising cash to repay debt.
The Queensland-based company hired Deutsche Bank in October to advise on the sale of its New Zealand unit, to focus on its more profitable Australian business. It wrote down the value of the kiwi business by A$188 million in 2011 after acquiring the operations for $870 million in 2006.
The company's decision to scale back its business comes after a debt-fuelled expansion before the global financial crisis, culminating in 2008 with the A$1.25 billion acquisition of rival Cleanaway to create Australasia's biggest waste disposal firm.
"The sale of our New Zealand business gives Transpacific increased financial flexibility," said Robert Boucher, the company's chief executive. "Beijing Capital is focused on investing in and developing the New Zealand business."
Beijing Capital is a Chinese state-owned company with water treatment, waste management, mass transit railway, toll road and property development interests. Its assets are valued at US$21 billion, according to a statement. HSBC managed the Chinese end of the purchase and the New Zealand investment is the company's first major international acquisition.
"The investment carries significant and mutual technical and commercial benefits for both companies and will open further strong commercial links between the New Zealand and Chinese markets," Wang Hao, Beijing Capital's group chief executive said.
"Beijing Capital Group believes substantial scope exists for cross border cooperation given the technical knowledge base of the Transpacific New Zealand management in areas such as landfill and local area environment management and the extensive scale of waste-sector investment opportunities in China and New Zealand," Hao said.
Transpacific said proceeds from the sale will be used to redeem its Step-Up Preference Securities, refinance debt and fund future investments. The company will consider the resumption of dividends in the near future, it said.
The dual-listed shares rarely trade on the NZX and were unchanged at $1.40, having declined 84 percent in the past 12 months. On the ASX they last traded at A$1.175, and have gained 29 percent in the past year.
The deal is expected to be completed mid-year, subject to Overseas Investment Office and Chinese regulatory approvals. Beijing Capital said the current New Zealand management team will remain in place, with operations continuing as normal.