Adamantem Capital closes the loop on turnaround play

The circular economy idea is about continually reusing, recycling and reprocessing materials. Picture: iStock.

Adamantem Capital has made it clear this year that ASX-listed buyouts are on the agenda, what with it being well positioned to buy the listed circular economy company Close the Loop after this year acquiring intellectual property company Qantm for about $250m.

It also made a play for New Zealand listed department store The Warehouse this year in a deal spearheaded by the retailer’s founder Stephen Tindall, although it was rejected by the listed company’s board.

But it still has a long to do list when it comes to offloading companies it has bought in the past.

DataRoom understands that after Lazard was hired to sell its laundries business, Linen Services Australia, it has had offers from private equity buyers, but not at a level where a deal would make sufficient returns for its investors, nervous about the large capital investment costs for replacing linen that come with running a commercial laundry outfit.

Then it still has to sell the small goods business Hellers, advised by Luminis Partners, across the Tasman - not an easy feat - at the time that consumers restrict spending on more pricey pork products.

It has the New Zealand aged care business Heritage Lifecare, which would challenging to sell in the current environment, what with other industry groups on the market but struggling to find a buyer.

Horse feed producer Hygain has been on the market before, as has the electrical business Legend, now slated for a listing next year, while Plena, which is part of its business Zenitas Healthcare is for sale for about $100m.

That’s expected to keep plenty of executives busy at the private equity firm, founded by former managing directors at Pacific Equity Partners, Anthony Kerwick and Rob Koczkar, for the coming months at least.

Eyes are also on its consumer business Retail Zoo that owns Boost Juice that it purchased in last year.

Apparently, the Betty’s Burgers chain is going well for the Sydney buyout fund, so that may be a winner.

On Close the Loop, advised by MA Moelis, the company’s board has indicated that it intends to recommend the 27c per share bid that values the group at $144m.

Its main area of business is the disposal of IT equipment such as printers, cartridges and computer monitors, but it also services equipment once it needs improvements or repairs.

It also manufactures soft plastics that are re-purposed for re-use.

Adamantem is believed to see the opportunity as a turnaround play, rather than an opportunity for bolt on deals to grow, with the potential for creating upside by improving the operational aspect of the company.

Although it grew annual earnings before interest, tax, depreciation and amortisation to $45m by 85 per cent, this was after an acquisition of another business, ISP Tek Services, which operates in the area of IT services in North America.

Its statutory net profit was down 8.8 per cent to $11.2m.

Adamantem and the board of Close the Loop have been engaging for some time.

The company’s share price has almost halved since last year, as the packaging arm in the Australian operations did not achieve expected growth and was restructured.