Loscam shareholders going around the auction block – once again
It’s baaack! The Australasian division of the Loscam pallet pooling business is once again being prepared for sale.
Last year, China Merchants Group, the state-owned firm which controls the company, paused a sale process for Loscam’s local business, citing market volatility. Along with China Merchants, two private equity groups – Trustar Capital and FountainVest Partners – also own stakes in Loscam.
Sources said a handful of the bigger buyout firms and core-plus infrastructure investors had been made aware of the mooted deal. The auction is expected to commence in the first half of the new year. A Loscam spokesman declined to comment on Wednesday.
Loscam has previously attempted to hive off its Australian business via Goldman Sachs and UBS. Reuters
Last time around, Loscam’s local business was being sold via Goldman Sachs and UBS. They had told potential suitors the company was making $90 million in annual earnings and had a 50 per cent margin. That would make it one of the most profitable businesses of its kind in the world.
The company had more than seven million pallets and revenues of $170 million in 2021, the sales flier said. It also had 34 per cent of the market. Now, sources close to discussions about a potential restarted sales process said the company is making between $100 million and $120 million in earnings.
KKR Infrastructure, Stonepeak and Morgan Stanley Infrastructure are the types of acquirers expected to be targeted. But top of the sell-side’s list will be the specialist core-plus infrastructure investors – firms which are seeking investments in essential infrastructure and are attracted to Loscam’s key role in the national logistics network.
Of course, all the larger private equity firms will take a close look given assets of this size do not often hit the market. However, Loscam’s local outfit is a large, mature business with stable growth. That means minimal opportunity to get big returns. Then there’s no obvious way of transforming the scale of the business through acquisitions or other transactions, giving it a distinctly core-plus flavour.
In its favour is its business model – difficult to disrupt given its long-standing customer relationships – and its scale and footprint, which would be difficult, if not impossible, to replicate. Not too much chance, either, of pallets being disrupted by artificial intelligence.
While the Loscam Australia and New Zealand sale ultimately did not go anywhere, there was plenty of interest. One potential suitor at the time was Raphael Geminder’s Pact Group – now in the process of being taken private by the billionaire businessman. Pact, a manufacturer and supplier of sustainable packaging, also operates a pooling business of a similar size to Loscam within its Pact Reuse segment.
The largest player in the market, of course, is Brambles’ CHEP. Brambles late last year decided to merge its CHEP China business with Loscam China, emerging with a 20 per cent stake in the enlarged entity.
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