The Cleanaway Waste Management Ltd (ASX: CWY) share price ended yesterday 4% higher on speculation of a takeover of Suez Australia.
Cleanaway is one of the largest waste management businesses in Australia. One of the things that it does is the weekly bin collection for some areas of Australia.
What’s this takeover talk?
The Australian Financial Review’s Street Talk is reporting that Cleanaway may be looking to buy the Australian division of global waste business Suez.
Apparently Cleanaway has been looking at the Suez business for some time. According to Street Talk, the Suez business collects and processes waste from over 4 million Australian residents and businesses.
What about the numbers?
The speculation is that Cleanaway may need to stump up over $2 billion to get the deal through. But it would also significantly increase the size of the Cleanaway business because it could grow the revenue and profit by perhaps half. The numbers that Suez generates is reportedly $1.5 billion of annual revenue and EBITDA (EBITDA explained) of between $150 million to $200 million.
With such a large deal, you’d expect that Cleanaway would be able to extract a good amount of cost synergies and perhaps make things more efficient.
There’s another layer of complication because Veolia is trying to acquire Suez, with Veolia not wanting Suez to sell any assets, like the Australian waste division.
Summary thoughts
There’s a lot going on right now in the waste management space right now it seems. As reported on Rask Media in January, Bingo Industries Ltd (ASX: BIN) is currently the subject of a takeover offer by funds advised by CPE Capital (CPEC), on behalf of CPEC and its potential co-investors in a consortium including Macquarie Infrastructure and Real Assets (MIRA).
If Cleanaway can pull off this acquisition, and increase profit margins, then it looks like it could be a very smart acquisition. Waste management is an attractive industry, particularly as Australian moves towards a larger focus on recycling than it already is.
