22 January 2013

New Zealand 2013 starts off with waste not, want not attitude

The number 13 may well be lucky for New Zealand-based companies as 2013 has kicked off smartly with one of the country’s largest deals in the last six years, according to Zephyr, the M&A database published by Bureau van Dijk. Just the other week Hong Kong giant Cheung Kong Infrastructure, which is controlled by billionaire Li Ka-shing, signalled its intention to expand its geographical presence in a country which it termed as being a core market.

The construction-to-energy giant announced it is buying New Zealand waste management company EnviroWaste for USD 412 million in cash in a deal which provides an exit for Australian private equity house Ironbridge Capital. The largest user of waste materials by mass in Hong Kong is balancing entering the disposals market with earning a steady revenue-stream from the Auckland-headquartered firm billed as the country’s second largest diversified, vertically integrated waste management business.

EnviroWaste is one of only two sector companies operating throughout New Zealand, owning and managing a network of collection facilities at 18 locations, 14 transfer stations, three landfills and a fleet of over 290 vehicles. With over 500 full time employees, it offers services to about half a million commercial and municipal council customers. Along with operating the waste infrastructure network, EnviroWaste also owns and manages ancillary businesses such as bulk waste haulage and landfill gas-to-electricity generation. The company’s largest rubbish dump is Hampton Downs, which accounts for roughly 30.0 per cent of annual landfill volumes in Greater Auckland and is New Zealand’s largest landfill measured by remaining capacity.

“Waste management provides [a] good opportunity for future growth. The rate of increase in waste is fundamentally linked to growth in population, GDP and consumption,” CKI group managing director HL Kam said. “It is expected that New Zealand will experience long-term waste volume growth as the economy continues to expand. As the volume of waste continues to rise, waste services offer great potential for growth.”

The deal was one of the top 20 announced deals by value targeting a New Zealand-based company over the last six years, and the largest transaction of 2013 to date, according to Zephyr. It also comes a little more than three months after China’s leading appliance manufacturer Haier made a play for one of New Zealand’s most famous brands, Fisher & Paykel Appliances. The public takeover was worth USD 610 million and was the country’s third largest transaction of 2012.

Meanwhile, the value of mergers and acquisitions targeting companies based in New Zealand fell in 2012 to AUD 4,787 billion from AUD 5,578 billion in 2011, continuing to form a series of peaks and troughs which stretches back to 2006. Against this decline, deal volume rose for the third consecutive year, advancing 7 per cent to 262 transactions (2011: 244), the highest level recorded since 2007 (344 deals). It remains to be seen whether this is a sign of things to come and whether the next 12 months is a window of opportunity for those companies turning their sights to growth.

While these are just two New Zealand-based deals among hundreds, it does beg the question whether there is a growing trend of Chinese and Hong Kong-based companies seeking expansion by making overseas mergers and acquisitions? In recent years, the People’s Republic has overtaken Canada, Australia and Russia to rival the US and the UK as the country with one of the world’s most acquisitive companies, according to Zephyr.

© Zephyr