Cleanaway’s $2.5bn uncertain offer for Suez assets
ASX-listed waste management giant Cleanaway will pay $2.5bn for French group Suez's Australian recycling and recovery business in a deal marred by uncertainty due to the latter's fightback against a hostile takeover by larger rival and shareholder Veolia.
Cleanaway told investors it had entered into a deal with Suez on April 5, which is subject to an equity raising and other conditions, including a possible termination if Suez is taken over.
Veolia, which has initiated court actions in France and Australia against the sale, recently warned Cleanaway to "carefully consider" any deal to buy Suez's local assets, following a fresh regulatory warning by France's financial regulator, Autorité des Marchés Financiers (AMF), about potential breaches by Suez.
AMF, which did not impose any sanctions on Suez, has publicly expressed concerns about Suez's defensive tactics to thwart a takeover by Veolia, its 29.9 per cent shareholder.
Cleanaway and Suez have agreed that Suez may terminate the deal if it gets an unmatched, superior offer for its assets by April 26.
May 6 is the date set by the two parties for any finalisation of a sweetened offer by Veolia for Suez, at or above 22.5 euros ($34.7) per share, which will also lead to termination of the arrangement.
"Should the above specified dates pass without termination by Suez, Cleanaway proposes to raise equity to partially fund the transaction along with additional debt facilities," investors were told.
"Cleanaway will seek to maintain a strong balance sheet post-acquisition."
Suez's recycling and recovery business generated $1.4bn in revenues in FY20.
The buyout is expected to deliver about $70m in annual cost synergies by FY25 and an extended footprint of assets for Cleanaway, valued at $4.5bn in terms of market capitalisation.
If the sale of all assets is terminated, Cleanaway will still spend $501m on a portfolio of strategic post collections assets in Sydney.
Last week Suez confirmed rumours it had been in discussions with Cleanaway since 2020.
While the talks were initiated by Cleanaway's former chief executive Vik Bansal, his recent controversial exit has left the finalisation in the hands of an interim management led by chairman Mark Chellew, former chief at Adbri Limited.
Mr Chellew said the acquisition will deliver superior scale and increased operating leverage, while adding more than 2,000 Suez Australian employees to Cleanaway's books.
Cleanaway chief operating officer Brendan Gill said there is also "strong alignment" of
"The transaction is expected to bring together two highly complementary businesses and be strongly accretive to earnings per share when the integration is completed," Mr Gill said.
The Sydney assets buyout will be subject to various conditions, including approval by ACCC, which is reviewing the local impact of any Veolia-Suez takeover, and is keen to undertake a public evaluation of any deal between Cleanaway and Suez.
Analysts at Macquarie, which is advising Cleanaway on the deal and arranging debt and equity financing, last month said it may raise as much as $2bn worth of equity for the acquisition.
Cleanaway reported $2.37bn in revenues at the end of the financial year and a net profit after tax of $152.9m.
Shares in Cleanaway are likely to trade higher on Tuesday, following its close on Thursday at $2.20 before the Easter long weekend trading break.
Originally published as Cleanaway's $2.5bn uncertain offer for Suez assets