Waste management company sold at 'quite a discount'

MARTA STEEMAN
Last updated 05:00 05/03/2014

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New Zealand's largest waste management business, Transpacific Industries, was sold to a Chinese state-owned buyer this week at "quite a discount".

Former managing director of Waste Management New Zealand, Kim Ellis, was a key part of the deal to sell Waste Management for $870 million to Transpacific Industries in 2006.

Ellis said he would like to set the record straight around that sale price and the sale announced this week of Transpacific Industries NZ to a subsidiary of state-owned Beijing Capital for $950m.

It sounded like Transpacific had got their money back, "but that was definitely not the case", Ellis said.

He said Waste Management was bought by Transpacific Industries for about $870m, its market capitalisation - the number of shares times the price for the shares- in mid 2006. At the time Waste Management had an enterprise value of just over $1 billion.

Then Transpacific spent another $90m on most of the South Island assets of EnviroWaste. Almost immediately after Transpacific closed the deal - an amalgamation - with Waste Management in mid 2006, Fulton Hogan put EnviroWaste, a competitor, on the market. That was because of the strong price paid for Waste Management.

Ironbridge bought EnviroWaste from Fulton Hogan at the same time selling the South Island assets of EnviroWaste to Transpacific for $90m.

Then Transpacific's Australian boss Terry Peabody "tipped in" anything up to about $100 million of industrial and liquid waste management businesses he had here into the New Zealand business.

"So the entry price for them (Transpacific) was more like $1.2 (billion) than $870m," Ellis said.

Later Transpacific Industries wrote down the value of the New Zealand business by A$182m - in 2011.

Ellis said Transpacific sold "at quite a discount to the entry price for the total group of assets that has just been sold". A few liquid waste businesses were sold last year but they were not material, "but essentially there's been diminishing value no question about that at all."

Some of that value destruction at Transpacific NZ was because of the GFC.

A number of executives from Waste Management later joined EnviroWaste, including him. EnviroWaste was sold last year to Cheung Kong Infrastructure (CKI) and he was the chairman of EnviroWaste at that time and is a director now.

Ellis said while two Chinese companies own the number one and two players in New Zealand waste management services they were completely different.

Beijing Capital was a state-owned enterprise with "high degree of opaqueness about the returns they required" while CKI was listed on the Hong Kong stock exchange and had a high degree of transparency on how it operated.

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Meanwhile, FIRST Union general secretary Robert Reid said the sale of Transpacific NZ to Beijing Capital was not all good news for workers.

In the Hutt this week 12 workers at Transpacific's recycling operation have been told they will be made redundant and the union was challenging the method of selecting those. That followed nine redundancies in Auckland and in other parts of the country.

Transpacific had had high debt for a number of years, Reid said, and had overextended itself after a buying spree.

In Christchurch the Amalgamated Workers Union says there is no concern from its members in Christchurch about Beijing Capital buying Transpacific NZ.

Transpacific has about 300 workers in the city's rubbish collection service, at Burwood and Kate Valley landfills and other services.

- Business

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