Market volatility thwarts CVC pursuit of Australia's Brambles
CVC Capital Partners has abandoned its proposed acquisition of Australia-based container supplier Brambles, citing market volatility.
Brambles confirmed on May 16 that it had been approached by the private equity firm, following reports of AUD 20bn (USD 13.8bn) bid. A day later, the company said in a filing that CVC would not be putting forward a proposal or seeking to conduct due diligence.
Shares in Brambles soared to an eight-month high of AUD 11.63 in response to the initial disclosure, before falling back to close on AUD 11.58 on May 16, up 11% for the day. This translated into a market capitalisation of approximately AUD 17bn, while the company was holding AUD 3bn in debt. As of late morning trading on May 17, Brambles was at AUD 10.71, down 7.6%.
The prospect of a deal underlines recent private equity appetite for large-cap listed companies in Australia. Last month, a KKR-led consortium bid AUD 20.1bn for Ramsay Health Care, which would be Australia’s largest PE buyout outside of the infrastructure and utility space if it proceeds. The Blackstone Group recently agreed to buy casino operator Crown Resorts for AUD 8.9bn.
Brambles originated in the late 19th century as a butchery business and subsequently expanded into transportation and logistics. It became a key service provider to BHP in the 1950s and acquired Commonwealth Handling Equipment Pool (CHEP), a pallets and logistics operation, from the Australian government in 1958.
The company diversified its business, entering new geographies and verticals, notably waste disposal. In the 2000s, it began to divest assets to focus on pallets and containers. KKR acquired Brambles Industrial Services, merging it with Cleanaway Australia to form Bis Industries. The business ended up in the hands of creditors in 2017 following a debt-for-equity restructuring.
In 2019, Brambles embarked on another restructuring, characterised by organisational simplification, regenerative supply chains, supply chain automation, and digitisation. More divestments followed: Triton and Abu Dhabi Investment Authority acquired the company’s global reusable plastic crates business; Grey Mountain Partners picked up the North America recycled pallet operation.
Operating primarily under the CHEP brand, Brambles owns approximately 345m pallets, crates, and containers across 60 countries. It employs 12,000 people in over 750 service centres. The company follows a circular business model focused on the world’s largest pool of pallets and containers that are shared and reused.
Revenue for the 12 months ended June 2021 came to USD 2.63bn, up from USD 2.45 bn in 2020. Over the same period, net profit rose from USD 428m to USD 526.1m.
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