Brambles announced last week that following a strategic review of its portfolio, it intends to pursue a separation of its IFCO RPC business through a demerger. To ensure optimal shareholder value is achieved, a sale of IFCO will also be evaluated. The separation of IFCO from Brambles will optimize shareholder outcomes and better position both businesses to realize a range of growth and value creating opportunities.
The strategic review assessed the business and operating models, financial and return characteristics, growth outlook and associated capital requirements of both IFCO and CHEP and reached the following conclusions:
- Although both CHEP and IFCO operate pooling models, they are distinct businesses with different financial profiles and customer propositions;
- There is no meaningful operational overlap or customer-related synergies between CHEP and IFCO that would be lost as a result of a separation;
- IFCO’s full value potential is unlikely to be realised under Brambles’ current capital allocation strategy which inherently prioritises the higher returning growth opportunities available in CHEP;
- A stand-alone IFCO will be a market leading, high growth RPC pooling business with an attractive financial profile. Separation will also provide increased flexibility to pursue and optimally fund value accretive growth opportunities; and
- Brambles ex-IFCO will continue to be strongly positioned to lead the platform pooling industry in customer service, innovation and sustainability. It will accelerate new areas of value by solving customer and retailer challenges in the supply chain, while continuing to deliver mid-single digit revenue growth and improved margins, returns and cash flows.
“The separation is consistent with Brambles’ core strategic priorities and will deliver a value creation opportunity for shareholders,” said Stephen Johns, Brambles’ Chairman. “It will provide them with focused investments in two world-class global businesses.” Brambles purchased IFCO for around $US 1.3 billion in 2010. According to analysts, it’s value could be in the range of $2.1 to 2.7 billion.
“Brambles will remain the clear global leader in platform pooling, a highly attractive industry with significant scope for sustained growth, substantial benefits from established scale, and highly attractive returns,” added Brambles’ CEO, Graham Chipchase. “The business will be positioned to generate continued strong revenue growth within its core markets, while also being focused on additional opportunities in emerging markets, first and last mile solutions, and from BXB Digital’s investment in technology and innovation through the supply chain.”
“IFCO is a strong business and a global leader in RPCs with a large addressable market, strong financial profile and clear opportunities to capitalize on growth in the sector,” Chipchase added. “Since its acquisition of IFCO, Brambles has made substantial investments and has grown the business to the scale, market share and competitive position it holds today. It is well positioned for its future as an independent company with a singular focus.”
As part of the separation, Brambles will also undertake an evaluation of its capital structure to ensure it is optimal for supporting future growth and shareholder returns while still maintaining a strong balance sheet and credit profile.
Further information on the separation will be communicated in due course, including the listing location for IFCO. Any transaction is also subject to final Board, regulatory and shareholder approvals. If approved, the transaction would be expected to be completed in the 2019 calendar year.
Following the proposed separation, Brambles offerings would include pallets (timber, plastic and display), RPCs (in Australia, New Zealand and South Africa), specialized containers as well as unit-load containment and safe handling equipment. Following the proposed separation, IFCO’s RPC solution would continue to focus on the transport of fresh products from producers to leading grocery retailers primarily in Europe, Asia and the Americas.
