KKR Buys Cleanaway Unit in Australia's Biggest Buyout

June 19 (Bloomberg) -- Kohlberg Kravis Roberts & Co. acquired Australia's biggest garbage collector and a mining services company from Brambles Industries Ltd. for A$1.83 billion ($1.3 billion), its biggest purchase in the Asia Pacific region. The two businesses had combined sales of A$863 million in the year ended June 2005, Melbourne-based Brambles said in a statement today. The Cleanaway operations handle almost 2 million trash collections in Australia and New Zealand each week. KKR has participated in $2.1 billion of waste acquisitions the past 18 months in Europe, where governments are promoting recycling to restrict landfill sites. Brambles Chief Executive Officer David Turner has raised $2.4 billion selling assets to focus on the company's biggest unit, the world's largest supplier of pallets used by forklifts to move goods. ``Waste management is a growing sector as more companies need to look at environmentally friendly ways of dealing with these things,'' said Atul Lele, who helps manage the equivalent of $260 million at White Funds Management in Sydney, including Brambles shares. ``It's also a rational industry structure with a few large players in Australia that have pricing power.'' Opening Asia Offices New York-based KKR's offer beat a bid from Brisbane-based Transpacific Industries Group Ltd. Transpacific shares slumped 86 cents, or 11 percent, to A$6.96 at 1:44 p.m. in Sydney. Brambles stock rose 8 cents, or 0.8 percent, to A$10.76. KKR in September announced plans to open offices in Hong Kong and Tokyo, its first locations in Asia, as it pursues investments in the world's fastest-growing economies. ``We are committed to working with management to continue to invest in Cleanaway and Brambles Industrial Services to take full advantage of the many growth opportunities,'' said Justin Reizes, a Hong Kong-based KKR director. Turner said he expects a $900 million profit on the sale. KKR was advised by O'Sullivan Pullini. KKR bought German recycler Duales System Deutschland GmbH last year for 260 million euros ($327 million). In January, it joined CVC Capital Partners Ltd. and other investors to buy Dutch waste-management company Holding AVR Bedrijven for 1.4 billion euros. The waste-management purchase from Brambles is KKR's third major investment in the Asia-Pacific region during the past year. `Relatively Aggressive' KKR raised $5 billion in May in an initial public offering of a private-equity fund, of which part of the proceeds is invested in a separate $10 billion pool. ``There is a lot of cash around and private equity firms are relatively aggressive in their approach,'' said Geoff Driver, general manager of Australian Foundation Investment Company Ltd., which owns more than five million Brambles shares. The Brambles acquisition eclipses Newbridge Capital LLC's A$1.4 billion purchase of Australia's Myer department stores in March. KKR said in April it would buy an Indian software unit from Flextronics International Ltd. for $900 million in the South Asian nation's biggest buyout. KKR last year bought Agilent Technologies Inc.'s semiconductor unit, whose operations are mainly in Singapore. Palo Alto, California-based Agilent is the world's biggest maker of scientific-testing equipment. KKR's 1989 purchase of RJR Nabisco Inc. for $31 billion remains the record leveraged buyout. KKR's investments include stakes in software company SunGard Data Systems Inc. and Toys ``R'' Us Inc. `Profitable Assets' Buyout firms typically finance takeovers by borrowing against their targets' assets to augment their own funds. They then seek to improve profits before selling the companies within five years to other funds or through initial public offerings. Cleanaway head Chris Berkefeld will manage Brambles's Cleanaway and industrial services businesses for KKR. Cleanaway has 65,000 commercial customers and also serves 87 municipalities. ``They are getting quality, profitable assets which are No.1 in the market,'' said Brent Mitchell, an analyst at Shaw Stockbroking in Melbourne. ``They can reformat the balance sheet, add some smaller bolt-on acquisitions and then look at turning it around for sale in a few years.''

To contact the reporter on this story:Robert Fenner in Sydney rfenner@bloomberg.net Last Updated: June 19, 2006 00:11 EDT

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