trading halt, page-18

Transpacific Buys KKR's Cleanaway for A$1.25 Billion (Update4)
By Robert Fenner

May 16 (Bloomberg) -- Transpacific Industries Group Ltd., Australia's biggest trash collector, agreed to buy Cleanaway Holdings Ltd. for A$1.25 billion ($1 billion) from Kohlberg Kravis Roberts & Co.

Transpacific will gain a business it missed out on 11 months ago, when KKR bought Cleanaway and a mining services unit from Brambles Ltd. for A$1.83 billion. Cleanaway has 65,000 customers ranging from restaurants to factories and collects trash for 85 municipal councils, Brisbane-based Transpacific said in a statement today.

Founder Terry Peabody, Australia's 15th richest man, has now spent A$2.6 billion in the past year buying rivals to accelerate earnings growth. The acquisition will increase earnings-per-share by 10 percent in fiscal 2008, Transpacific said.

``The Cleanaway business is an excellent fit and we are very happy that this opportunity has arisen again,'' Peabody said in the statement.

Transpacific shares were halted from trade the past two days while negotiations were completed. The stock has gained 41 percent this year and has risen more than fivefold since first being sold to the public in May 2005 at A$2.40 each.

Peabody owns 51 percent of the company, and has a personal wealth of $900 million, according to Forbes magazine.

Debt, Share Sale

The price paid to KKR is ``not terribly dissimilar'' to the amount Transpacific offered Brambles for the unit last year, Peabody told reporters on a conference call. The company was prepared to pay up to A$1.1 billion for Cleanaway when Brambles put it up for sale, he said.

KKR paid about A$1 billion for the assets, giving it a 25 percent return in 10 months, according to a spokesman for the firm in Sydney. O'Sullivan Pullini advised KKR on the sale.

The sale will allow the buyout firm's Australian industrial logistics business to ``focus on higher-growth opportunities,'' KKR Asia's Managing Partner Joseph Bae said in an e-mailed statement.

Cleanaway's earnings before interest, tax, depreciation and amortization are forecast to rise 8 percent to A$110 million in fiscal 2008, signaling Transpacific has paid about 11.4 times forecast earnings. It paid 11.6 times earnings for Waste Management NZ Ltd., according to data compiled by Bloomberg.

Transpacific has arranged loans with National Australia Bank Ltd., Australia & New Zealand Banking Group Ltd. and Commonwealth Bank of Australia to help fund the acquisition.

The company also plans to sell as much as A$430 million of new shares, and A$250 million of hybrid securities, it said in the statement.

Acquisitions

That will leave Transpacific with A$500 million for further acquisitions, Peabody said. ``There is still a huge number of bolt-on acquisitions that are available, and we have a large number of those targeted,'' he said.

Peabody's NZ$970 million ($642 million) takeover of Waste Management NZ last year created the biggest trash collector on both sides of the Tasman Sea.

In November, the company agreed to buy Baxter Group Ltd. for A$240 million to gain landfill sites. Last month Transpacific bought closely held Twigg Group for A$155.8 million to add more landfills and waste transfer stations in three Australian states.

Transpacific is targeting A$64 million in savings from the acquisition by fiscal 2009, including eliminating jobs, savings on trucks and equipment, and boosting sales by adding new customers.

Cleanaway has a fleet of more than 950 trucks and employs about 1,600 people. It handles almost 2 million trash collections in Australia and New Zealand each week.

To contact the reporter on this story: Robert Fenner in Sydney [email protected]

Last Updated: May 16, 2007 04:58 EDT