Limited earnings for Brambles in Loscam buy

DataRoom revealed earlier this month that Brambles was set to line up for the Asia unit, which may be sold off separately to the other Australia and New Zealand parts of Loscam, owned by China Merchants.

Brambles would gain only limited overall earnings increases from an acquisition of the Loscam Southeast Asian business should it emerge as the buyer. That’s according to analysts at Citi, who say this is because CHEP China, which Brambles sold in 2022 to Loscam for $132m, was break-even at best at the time it offloaded it.

That analysis comes after DataRoom revealed on June 5 that Brambles was set to line up for the Asia unit, which may be sold off separately to the other Australia and New Zealand parts of Loscam, owned by China Merchants. Citi analysts say the size of the Asian deal at about $600m to $700m would not cancel out near-term capital management for Brambles but might affect the duration of a potential buyback or delay it.

DataRoom revealed last year that Loscam was planning to come back to the market with the business after an earlier sale process did not yield a result, offering up its Australia, New Zealand and Asia operations.

It now has swung back into action, as first reported by this column, with UBS advising. KKR is working with Morgan Stanley, while EQT is thought to be well placed (potentially working with Goldman Sachs) and Morgan Stanley Infrastructure Partners has been around the situation.

Analysts say the last Asia sale was struck on 11 times earnings before interest, tax, depreciation and amortisation, and applying the similar multiple suggests the Asian operations would have generated $61m in EBITDA. While Brambles has the balance sheet to fund the deal, analysts expect only material Loscam profit growth in the last year or a discount to the original multiple makes the deal accretive.