Cleanaway has officially got itself into a scrap with French waste giant Veolia Environnement by agreeing to buy the Australian recycling assets of Suez for $2.52 billion while Suez’s parent company is in a takeover battle with Veolia.
The ASX-listed waste management company announced the proposal on Tuesday, one month after it first signalled its interest in the Australian operations of Suez and flagged the potential hurdles posed by Veolia’s bid for the entire business.
Cleanaway said Suez may terminate the deal by 6 May 2021 if there is an announcement of an agreement with Veolia, and may terminate by 26 April if a superior offer for Suez Australia is made and not matched by Cleanaway.
“Suez’s Australian Recycling and Recovery business has a high-quality network of assets across Australia that will accelerate the implementation of our Footprint 2025 strategy,” said Cleanaway Executive Chairman, Mark Chellew.
“The acquisition will deliver superior scale and increased operating leverage. We look forward to more than 2000 of Suez’s Australian employees joining the Cleanaway team in due course.”
Cleanaway was hit by the surprise departure of chief executive Vik Bansal in January following allegations by The Australian Financial Review that Mr Bansal had bullied and harassed staff.
Mr Chellew is acting as CEO until a replacement is found.
Veolia announced its plan to take over Suez in October last year when it acquired a 29.9 per cent stake in the French company, but the proposal has become bogged down in a legal battle and counterproposals by Suez.
Suez has given Veolia until April 20 to negotiate on the basis of its proposed solution, which involves a €20 per share takeover price – €2 more than Veolia has offered – and selling more than half the company to private equity, or until May 5 to make a bid for a full takeover at $22.50 per share.
Cleanaway said it first approached Suez in April last year about a potential deal.
Cleanway said that if its proposal survives the Veolia deal, it plans to raise equity to partially fund the purchase along with additional debt facilities.
The $2.5 billion deal will be significant for Cleanaway, which currently has a market capitalisation of $4.5 billion.
“The transaction is expected to bring together two highly complementary businesses and be strongly accretive to earnings per share when the integration is completed,” said Cleanaway chief operating officer Brendan Gill.
“Cleanaway will continue to maintain a strong balance sheet following whichever transaction is
completed and will retain ample capacity to support future growth for the combined group.”
Cleanaway has agreed to pay a $30 million break fee if its capital raising related to the deal is not successful, and a $45 million break fee if the transaction does not complete due to failed regulatory approval.
Suez will pay Cleanaway a $30 million break fee if the transaction does not complete because FIRB approval is not obtained or for Suez’s material breach.
Cleanaway is being advised by Macquarie Capital and Greenhill. Macquarie Capital is also arranging any debt and equity financing for the deal. Gilbert + Tobin is acting as legal adviser.
Source: Thanks smh.com