Brambles has announced an agreement to combine its Oil & Gas container solutions businesses with Hoover Container Solutions to create an independent joint venture company.
The joint venture will be 50 per cent owned by Brambles and 50 per cent owned by Hoover shareholders. Hoover’s major shareholder is First Reserve, a leading global private equity and infrastructure investment firm exclusively focused on energy.
The combination of these businesses will create the second-largest global provider of container logistics solutions to the Oil & Gas and Chemicals sectors, delivering enhanced scale, capabilities to support customers worldwide and substantial synergy opportunities. The formation of HFG enhances Brambles’ position in Oil & Gas and Chemicals container logistics, consistent with the Group’s strategy and without any additional capital outlay.
The transaction provides Brambles with long-term optionally in relation to the scale of, and allocation of capital to, the Group’s Oil & Gas containers investment. HFG will operate under the leadership of Hoover chief executive Donald Young and an eight member board of directors, with equal representation from Brambles and Hoover shareholders.
The HFG CFO will be a Brambles nominee. A shareholder agreement will govern key aspects of the joint venture, including governance and exit provisions. Brambles anticipated that the transaction will complete during October 2016, subject to regulatory clearance and customary conditions precedent.
- The transaction is expected to be neutral to Brambles’ underlying earnings per share in FY17, prior to transaction costs, and accretive as cost and revenue synergies are realised. HFG is targeting annual cost and capital expenditure synergies of US$5-10 million within three years and will also seek to maximise substantial revenue opportunities related to cross selling services and products globally.
- Brambles will receive consideration of approximately US$75 million from First Reserve to equalise ownership of HFG -US$40 million receivable in cash upon transaction close with the balance deferred.
- Brambles will contribute Ferguson and CCC to HFG with debt, including a US$150 million subordinated shareholder loan with a cash interest rate of 10 per cent per annum, payable quarterly.
- HFG will target an independent funding facility as soon as capital market conditions are conducive -enabling full repayment of the Brambles’ shareholder loan and allowing HFG to be self-funding.
- HFG will seek to maintain a borrowing ratio consistent with the long-term asset lives in the industrial container leasing sector.