01/12/05 Brambles to Sell Cleanaway to Focus on CHEP

Brambles Industries Ltd., the world's biggest supplier of pallets used to move and store goods, put its Cleanaway and Industrial Services businesses up for sale to focus on its more-profitable pallet and document storage units. The company's shares surged 10 percent

To help cut costs, the company will unify its stock, which is listed on the Australian and London Stock Exchanges, into a single company with a primary listing in Australia. After the assets sales, Brambles will have about A$2.8 billion ($2.1 billion) to spend on a share buyback, the company said.

Chief Executive David Turner has been selling less-profitable businesses to focus on the higher returns of CHEP, the pallet unit which is his biggest division, and faster-growing businesses such as Recall, which stores and manages documents. He last month sold Cleanaway Germany for A$893 million, and the Australia and U.K. units are worth as much as A$1.7 billion, according to Merrill Lynch & Co.

``The fact that that are acting strategically helps perceptions of management as they focus on their growth business. said John Gethin-Jones, who manages the equivalent of $10 billion at Queensland Investment Corp. in Brisbane, including 30 million Brambles shares. ``The money could be used for buybacks or investing for growth which we support.''

Brambles shares rose 74 cents to A$9.95 at 2:10 p.m. in Sydney and reached a high of A$10.20. The stock has climbed 43 percent this year, triple the benchmark S&P/ASX 200 Index's 14 percent gain. Of the 11 analysts tracked by Bloomberg, 10 rate the shares ``buy'' and one rates the stock ``hold.''

Cleanaway's Australian and U.K. units are the No.1 and No.2 waste providers in those markets.

Buyers Interested

Brambles sold Cleanaway Germany to Sulo Group, which is owned by buyout companies Blackstone Group and Ajax Partners. The global waste group was the company's second-biggest and least-profitable division last year. It was also the only one to record a decline in profit before interest, tax, goodwill amortization and one-time charges, dropping 8.6 percent to A$191 million. It had sales of A$2.7 billion.

Waste Management NZ Ltd. Managing Director Kim Ellis said he would be interested in buying Cleanaway Australia.

``We want to be an important player over there and we're not there yet,'' Ellis said in a phone interview from Auckland. ``Of course we're interested. It takes years to build up a fleet of vehicles picking up rubbish all round the country. I don't see any reason why we couldn't finance an acquisition.''

The Industrial Services unit, which provides logistics and management to the mining and steel industries, is its second-least profitable. It had sales of A$742 million in 2005.

London Discount

Regional Businesses, the company's smallest unit, is also up for sale. It's made up of Interlake, a storage-rack maker, tank- rental provider Eurotainer and TCR, which provides ground support to airlines.

Including Cleanaway Germany, the businesses to be sold accounted for 46 percent of Brambles' sales but only 28 percent of operating profit. CHEP and Recall contributed 72 percent of profit on 54 percent of sales.

Brambles says abolishing its London unit will increase the market capitalization in Australia and help cut costs. Brambles Industries Plc shares were worth 8.9 percent less than Brambles' Sydney-based shares at the close of trade last week, the company said.

To contact the reporter on this story:
Vesna Poljak in Sydney at vpoljak@bloomberg.net