EnviroWaste Services, New Zealand's second biggest waste management company, is up for sale and its owner - Australia's Ironbridge Capital - is considering exiting through an initial public offer (IPO), a financial market source said today.
The source said investment banks Macquarie, First NZ and UBS made their sales pitches to Ironbridge a fortnight ago and that an announcement as to who would advise the Sydney-based private equity investment company on the sale process would be made shortly.
"It is likely that the sale process will start in May,'' the source said.
Ironbridge's New Zealand operating partner Kerry McIntosh declined to comment.
"We do not comment on speculation around our intentions in respect of our portfolio investments,'' he said through a spokesman.
Ironbridge originally paid $365m in December 2006 for EnviroWaste but the company later sold an asset in Canterbury to its competitor, Australia's Transpacific Industries. EnviroWaste later invested in some bolt-on acquisitions which took the invested amount back up to around $365m.
EnviroWaste was one of two large transactions made by Ironbridge just before the global financial crisis.
The second was MediaWorks, whose assets include TV3, Radio Live and More FM, which cost $741m in a leveraged buyout in 2007.
Based on EnviroWaste's earnings before interest, tax, depreciation and amortisation of $48m, the likely sale price would be up to seven times that - or $336m, the source said.
Unlike last year's IPOs, which involved only partial sell-downs and listings of companies such as Summerset Holdings and Trade Me, Ironbridge could be looking at offloading the entire 100 per cent, the source said.
Ironbridge has positive market sentiment running its favour, with the share market having made solid gains since last August, but the promoters would need to be quick to squeeze the IPO in before the expected partial privatisation of Mighty River Power in September, fund managers said.
The source said a trade sale of EnviroWaste was not seen as likely given that the country's biggest waste management company, Transpacific, would run into the competition problems given the two already enjoy a tight duopoly in New Zealand.
Furthermore he said EnviroWaste, whose assets include the Hampton downs landfill, was probably too small to attract Transpacific's Australian competitors.
New Zealand has not been a happy hunting ground for Ironbridge, having paid top dollar for both EnviroWaste and Mediaworks not long before the global financial crisis.
"They are talking optimistically about making some of the money back (on EnviroWaste),'' the source said. "I think they will do marginally better than break even,'' he said.
If priced and structured correctly, EnviroWaste Waste would be a useful addition to the New Zealand equity market, Mint Asset Management portfolio manager Shane Solly said. He added investors generally had a good investment experience with Waste Management as a listed public company before it it was taken over by Transpacific in 2006.
Matt Goodson at BT Funds Management said an EnviroWaste IPO would would make sense.
"You have an equity market in new Zealand that has performed quite well of late, in contrast to Australia's,' he said.
He said landfill sites were good businesses "because they are effectively have a local monopoly''.
