Australian listed waste management company Transpacific Industries is looking to sell its widespread New Zealand operations, to pay off debt, and focus on its Australian operations.
Transpacific, the country's largest waste management company, purchased its New Zealand operations in 2006 for $870 million. Transpacific's shares in Australia were up almost 9% at $A1.09 ($NZ1.25) after opening, following the earlier divestment announcement.
Following a business and operational review this year, Transpacific said in an Australian market update yesterday it had decided to divest its New Zealand business to allow greater focus on growth opportunities in Australia.
''Over the last two years, Transpacific has made significant progress in strengthening its balance sheet, reducing debt and improving its funding costs,'' the company said.
A Craigs Investment Partners broker said Transpacific initially had an aggressive acquisition strategy, largely funded by debt, but then the global financial crisis struck, which prompted many councils to renegotiate rubbish collection contracts.
''It [waste management] is an attractive sector. Transpacific is a sound operator, but it has been impeded by layers of huge debt,'' he said.
Transpacific listed in Australia in May 2005 and embarked on its acquisition programme, including New Zealand's listed Waste Management. Its 2014 New Zealand full-year earnings before interest, tax, depreciation and amortisation is forecast at $110 million.
In April last year, Transpacific reached a $A35 million (then $NZ43.7 million) settlement with shareholders threatening a class action alleging breaches of disclosure rules between 2007 and 2009.
Transpacific said yesterday any proceeds from a potential sale, which would ''only proceed if it appropriately reflects value for the shareholders'', would initially be used to further pay off debt, possibly including redemption of the step-up preference securities.
By the numbers
Transpacific Industries around Australia and New Zealand. -
• 6500 employees, 1100 NZ.
• 300 sites and depots, 74 NZ.
• 4300 vehicles, 800 NZ.
• More than 50 technical treatment and processing plants.
• More than 45 resource recovery, recycling and baling facilities.
