Chile asset stacks up well for Brambles
Source: The Australian Financial Review
by Trevor HoeyLast week Brambles announced it had acquired Renta Pack S.A. (Rentapack), Chile's leading provider of reusable plastic crate cooling services. Management said the enterprise value was $US63 million ($80.6 million) and that the group was forecast to generate earnings before interest, tax, depreciation and amortisation (EBITDA) of $US8.6 million in calendar year 2015.
This implies an enterprise value to EBITDA multiple of 7.3, which analysts at Deutsche Bank noted was in line with that implied by the purchase price of IFCO in 2011.
While IFCO was a much larger acquisition ($US1.2 billion), the strategy was similar in that it provided Brambles with enhanced growth opportunities through a strengthened position in the global reusable plastic container sector, as well as diversifying its revenue base by product platform, geography and customer type.
Chief executive Tom Gorman, who was also at the helm when the IFCO purchase was executed, said the Rentapack acquisition was consistent with the group's strategy of complementing organic growth in attractive segments and geographies by acquiring companies with market leading positions, strong financial returns and promising growth outlooks.
In particular, it has provided Brambles with an important position in the Chilean fresh food supply chain, and Gorman highlighted it would drive a step change for IFCO's footprint in Latin America while complementing CHEP's presence throughout the region.
Analysts at Deutsche Bank commented on Rentapack's attractive margins which based on disclosed revenue and EBITDA pointed to a margin of 44 per cent comparing favourably with Brambles overall reusable plastic crate-business segment margin of 25 per cent.
While Deutsche Bank still sees acquisitions as strategically beneficial and reaffirmed its buy recommendation the group share price is now trading in the vicinity of the broker's 12-month price target of $11.30.