Here’s a deal that could get very messy, if it manages to remain alive for the next month.
Cleanaway has finally agreed to buy the Australian recycling assets of French group Suez for $2.52 billion – an offer that will entangle Cleanaway in a bitter takeover battle for Suez’s parent company in France.
Cleanaway revealed the proposed Suez deal in March and has taken the past month to knock the deal into shape.
It remains a presumptive offer – there are three deadlines – two this month and one in early May, that must be cleared before the offer becomes a real deal.
But the offer will see Cleanaway run up against a determined bidder for Suez in the shape of French waste giant Veolia Environnement (which operates in Australia as well).
In its March announcement Cleanaway mentioned the potential hurdle posed by Veolia’s bid for all of Suex.
Cleanaway said Suez may terminate the deal by May 6 2021 if there is an announcement of an agreement with Veolia, and may terminate by April 26 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.”
Veolia announced its plan to take over Suez in last October when it acquired a 29.9% stake in its rival, 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 euro a share takeover price – 2 euros a share 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 euros a share.
Cleanaway said it first approached Suez in April last year about a potential deal.
Cleanway said that if its proposal survives the Veolia assault on Suez, it plans to raise equity to partially fund the purchase along with additional debt facilities.
The $2.5 billion deal is a big deal for Cleanaway, which will grow significantly from its current market value of $4.5 billion.
Suez Australia includes several infrastructure assets, a workforce of more than 2,000 people and a fleet of more than 1,000 vehicles,
“The transaction is expected to bring together two highly complementary businesses and be strongly accretive to earnings per share when the integration is completed,” Cleanaway chief operating officer Brendan Gill said in Tuesday’s statement.
“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.
Investors loved the news, boosting Cleanaway shares by 16% to $2.55.