Waste management firms consider $2.5B acquisition plan

Industrial group, Suez, has announced a sale agreement with Cleanaway for its recycling and recovery activities in Australia subject to the results of negotiations between Suez and Veolia.

The agreement is reported to be in line with Suez’s 2030 strategic plan which specifically allows for the possibility of Veolia taking control of this asset – through a takeover offer or through direct purchase of the Australian recycling and recovery activities.

Under the agreement, in certain circumstances, a selection of landfill and transfer station assets in the Sydney area would still be sold to Cleanaway.

The negotiations with Cleanaway have reportedly taken place over several months and resulted in an agreement that offers real prospect for the development of this business and recognises the commitment and professionalism of SUEZ’ Australian employees. Further, SUEZ thanks Cleanaway for its willingness to reach an agreement and for having taken into account its current context, notably to still allow for the possibility that Veolia could acquire this asset.

The agreement signed with Cleanaway reflects an enterprise value of $2.52 billion, representing an implicit multiple of 12.9x its reported 2020 EBITDA (or 11.7x its normalised 2020 EBITDA). Suez emphasises that this value shows the relevance of its asset rotation strategy under the Suez 2030 strategic plan. Cleanaway’s offer allows to achieve this objective of creating value in the corporate interest of the Group.

It is possible, until 21 April 2021, for any third party, including Veolia, to submit a superior offer on the recycling and recovery business in Australia. If such a superior offer was to arise, Cleanaway would be notified and has an ability to match.

Suez’s agreement with Cleanaway is also subject to various conditions including ACCC approval, an approval under the New-Zealand foreign investment regime (OIO), Cleanaway’s successful financing of the transaction, no material adverse change and SUEZ obtaining FIRB approval in connection with a pre-closing restructuring involving its water business.

In the event the Australian recycling and recovery transaction is terminated due to Suez exercising its right to terminate the transaction by 5 May 2021 or other events, Cleanaway and Suez have agreed that Cleanaway will acquire a portfolio of post collection assets in the Sydney area. The assets comprise two landfills and five transfer stations and will be acquired for $501 million. This transaction would also be subject to various conditions including Australian Competition and Consumer Commisson (ACCC) approval, no material adverse change and a change of control of Suez.