UBS in spotlight as Brambles sale probed

Australia’s largest-ever buyout, which was completed in June, has come under scrutiny by regulators following a complaint about the way the UBS auction was conducted.

The Australian Securities and Investment Commission (ASIC) is probing the UBS-run A$1.83 billion ($1.35 billion) sale of two Brambles subsidiaries to US buyout house KKR after a letter of complaint was received from a losing bidder.

CHAMP Private Equity, a Sydney-based buyout house, bid unsuccessfully for Brambles’ Australian waste management subsidiaries alongside trade partner Transpacific Industries. A source close to CHAMP told PrivateEquityOnline the firm had expected to participate in a final round of negotiations, which never materialised.

The source said: “We were told there was a ‘locked box’ of information that hadn’t yet been provided, which we believed would be opened to two or three bidders in the final week of negotiations. We were very confident we’d get a call from UBS inviting us back to further talks, but instead they went straight into exclusivity with KKR.”   

The source said this turn of events may have been linked to CHAMP and Transpacific’s decision to decline a staple financing package for the deal that had been offered to them by UBS, the financial adviser to the vendor. KKR accepted the staple financing.

The source said had they been allowed to into the mooted final round, CHAMP/Transpacific would have submitted a bid of at least A$1.85 billion, thus giving more money to Brambles shareholders than the deal struck with KKR. Two other parties were also involved in the latter stages of the auction: CCMP Capital and a joint bid submitted by CVC and Ironbridge Capital.

A spokesperson for Brambles said there were conditions attached to the CHAMP/Transpacific bid. In a statement announcing the deal on 19 June, Brambles chief executive David Turner said: “KKR clearly made the best overall offer – a good price and, importantly, a very clean sale able to be speedily completed and with no conditions precedent.”

The spokesperson this week said the comments made Brambles’ position “very clear” and that it did “not feel the need to comment any further”.

The conditionality is believed to refer to competition concerns and a CHAMP/Transpacific requirement that three members of the target’s senior management team be required to commit equity to the deal. The CHAMP source dismissed the competition concern as a “flimsy argument” and said it would have been prepared to drop its requirement relating to equity contributions.

A spokesperson for UBS said: “The process was completely transparent. While we do not comment on discussions we may or may not be having with regulators – including ASIC – we would cooperate fully with any request we received.”

ASIC declined to comment.