Brambles to sell half its business for up to £1.5bn

The Anglo-Australian pallet giant Brambles is to sell nearly half its business, including its Cleanaway waste-management operations, delivering a windfall of least A$2.8bn (£1.2bn) to shareholders.

The London-listed shares were the biggest riser on the FTSE 250 yesterday and closed up 10 per cent at 401p.

As part of the break-up - the third structural overhaul in five years - Brambles is selling its industrial services and regional businesses divisions and will be left with the fast-growing pallet-leasing and data-management arms.

It expects the total asset sales and associated cost savings to generate surplus capital of £1.2bn, which it plans to return to investors through a share buy-back or other means.

Brambles plans to abandon its much-maligned dual-listing company structure and will create a new holding company for its CHEP pallet-leasing business and its Recall information management operation. Its primary listing will be in Sydney but it will retain a secondary listing in London.

Analysts at Merrill Lynch reckon the asset sales could fetch £1.5bn. They said the UK Cleanaway arm, Britain's largest waste-management group - could sell for £474m, or 7.5 times forecast 2006 earnings, and the Australian one for £258m, equivalent to seven times forecast 2006 earnings. Merrill said the Spanish construction and services group FCC stood out as a likely trade buyer for Cleanaway UK, which collects and recycles waste, including street-cleaning.

The news came only a month after Brambles sold its Cleanaway business in Germany for £387m and dismissed speculation it would sell the rest of the waste-management arm with a firm pledge to keep Cleanaway UK.

David Turner, Brambles' chief executive, said yesterday the group would focus on pallet leasing and data management because they offered the most growth potential. He said he expected CHEP to post revenue growth of 7-9 per cent over the medium term while Recall is set to grow by 6-8 per cent.

He said: "It enables us to focus on these two businesses and realise the growth available at CHEP and Recall and, at the same time, take advantage of the turnaround in the other businesses because they are performing very much better than in the past."

He said the company had been approached by a number of private-equity investors and trade buyers for all the assets up for sale, but it has not yet begun talks with any of them. Waste Management NZ said it would be interested in buying Cleanaway Australia.

Private-equity firms have shown strong interest in the industry lately, with Sulo's acquisition of Cleanaway UK backed by Blackstone and Apax Partners, and Terra Firma going on a buying spree in Britain.

Brambles' asset sales and the move to the new listing structure are due to be completed within 12 months.