KKR sets Australian buyout record

A relative newcomer to the Asian buyout space, Kohlberg Kravis Roberts is the $1.35bn winner in Australia’s closely-watched auction of two subsidiaries of Brambles Industries.

Kohlberg Kravis Roberts, a US buyout firm, has made waves with its first Australian buyout, winning a A$1.83bn ($1.35bn) auction to acquire the waste management businesses of Brambles Industries, a global support services group.

Sydney-based rivals have called KKR’s successful bid ‘aggressive’ compared to local expectations of A$1.6bn to A$1.7bn. One manager said: “It is a big price for a good asset. But it has certainly raised a few brows.”

He said: “Scale is the main attraction, especially for KKR. It’s a quality business, with a good management team. But there is a limit to how much one can pay especially if things don’t go as planned, and it is hard to see what can be done to get above expected returns.”

KKR is buying the Australian and New Zealand businesses of Cleanaway, a waste management operator, and Brambles Industrial Services Australia, a provider of support services to large companies in the resources sectors.

The combined businesses have sales of A$863m ($651m) and operating profit of A$98m ($74m) for the year ended June 30, 2005, Brambles said in a statement.

Three other final contenders for the sale were Ironbridge Capital, an independent Australian private equity firm, with global firm CVC Asia Pacific; CHAMP Private Equity, a local buyout firm, with trade partner Transpacific Industries Group; and JP Morgan’s private equity arm, under its new independent banner CCMP Private Capital Asia, in partnership with Tenix, an engineering firm.

The Brambles deal marks KKR’s third major Asian investment over the past year.  KKR is completing a $900m buyout of Flextronics’ software development and solutions business. Last year, KKR concluded a $2.66bn buyout of Avago Technologies, a Singapore-based semiconductor company. KKR acquired earlier this year, a Dutch waste management firm AVR for €1.4 billion ($1.76 billion), and last year, it acquired a German recycling business DSD for €260 million ($327.5 million).

KKR set up offices in Hong Kong and Tokyo last year.