Brambles announces the sale of its recycled whitewood pallets business in North America for an enterprise value of US$115 million
Sydney – 9 January 2018: On 11 August 2017, Brambles announced its decision to divest CHEP Recycled, its noncore North American recycled whitewood pallet business. CHEP Recycled provides a network of pallet management services in the USA and Canada supplying and recycling over 90 million, primarily whitewood, pallets annually.
Brambles has announced that it has entered into an agreement to sell the CHEP Recycled business to Grey Mountain Partners for an enterprise value of US$115 million. The cash proceeds will be subject to final adjustments on closing for balance sheet items. The transaction is subject to standard regulatory approval and is expected to be completed within 45 days.
CHEP Recycled currently manages 161 plants and total pallet management (TPM) sites, of which 73 sites service the CHEP Recycled business. Those 73 sites, together with approximately 2,400 employees, are included in the sale and will transfer to Grey Mountain Partners on completion.
The balance, 88 plants and TPM sites that service the CHEP USA pooled pallets business, will be retained by Brambles together with approximately 1,600 employees. These 88 service centers will continue to form part of the core operations of the CHEP USA pooled pallets business and to be reported within the CHEP Americas segment.
“Our strategic review highlighted that CHEP Recycled is not a core part of Brambles and that the business has not delivered the financial returns we require to generate sustainable shareholder value,” Graham Chipchase, Brambles’ CEO, stated in the August 2017 CHEP Recycled announcement. “In addition, under new ownership, CHEP Recycled could be operated with a lower cost structure, providing it with a competitive advantage and access to additional revenue opportunities not currently available. For these reasons, we believe that CHEP Recycled’s overall returns and growth outlook are more likely to improve under alternative ownership.”
“Going forward, we will focus on Brambles’ value proposition as the world-leading provider of supply-chain logistics solutions based on the provision of reusable pallets, crates, and containers,” Chipchase added at the time. “With this in mind, we will retain the CHEP Recycled facilities that assist with the repair and recovery of our pooled pallets, ensuring we keep the synergies achieved in our US pooled pallet business to date.”
Accounting implications
CHEP Recycled was classified as “held for sale” and recognized in discontinued operations in Brambles’ FY17 accounts, which were published on 21 August 2017.
Brambles expects that the net proceeds of the sale of CHEP Recycled will be in line with the carrying value of that business.
Grey Mountain Partners
Grey Mountain Partners is a Boulder, Colorado-based private equity firm that focuses on partnering with management to create lasting value through operational improvements and strategic growth initiatives. Grey Mountain invests in middle-market companies across a wide range of industries, manages approximately $700 million of assets, and is currently investing from its third fund, which was raised in 2013. For further information, please visit www.greymountain.com.