Chep's chipper as competition calms down

BRAMBLES' core Chep pallet business is expected to have an easier run in the European market in the short term after the sale of a key rival, as this could reduce competition.

German tourism company TUI has sold its 67 per cent stake in French company Algeco for E320million ($544 million) to British private equity company TDR Capital.

Algeco owns La Pallete Rouge, Chep's main competitor in the European market, which has been losing money after a period of too-rapid growth.

Citigroup Smith Barney analyst Jason Smith said there had been concerns Algeco might be sold to a larger company committed to expanding the LPR pallet business.

But as a private equity investor, the new owner would be focusing on cash flow and cutting capital expenditure to return its acquisition to profitability, leading to a better operating environment for Chep.