Boral to sell Western Landfill business

Company enters into agreement to sell landfill operations at Deer Park Quarry in Melbourne

BORAL Ltd have entered into an agreement to sell their Western Landfill business, in Melbourne, to Transpacific Industries (TPI). Under the agreement, TPI will pay Boral a A$150 million upfront payment to purchase the business, plus A$15 million for site preparation work.

Boral will also receive a long-term earnings stream from TPI in the form of fixed payments and volume-based royalties for the life of the landfill. Initially, the earnings stream from the landfill business is expected to be around A$15 million per annum, depending on volumes, with the potential to grow over time.

While the transaction will have a small dilutive impact on Boral’s earnings, the A$150 million cash payment will further strengthen Boral’s balance sheet and, on completion of the transaction, Boral expect to realize a pre-tax profit of approximately A$105 million after transaction costs, subject to normal completion adjustments.

Mike Kane (pictured), Boral’s CEO and managing director, said that while Boral had successfully operated the landfill business in Melbourne for the past 15 years, managing developed landfill operations was not a core business for the company.

‘Taking a whole-of-life perspective to managing our quarry assets is an important priority for us in terms of both sustainable land management and shareholder value creation,’ he said.

‘As with all of our quarry end-use projects, we look to maximize value through the extraction of quarry materials and then selling the land at a time when it makes sense, using the cash to deliver value to shareholders.

‘In this case we have developed a very elegant and efficient solution where a third-party landfill operator will concurrently use the air space created from our ongoing quarrying activities at Deer Park Quarry for much-needed landfill activities.

‘The opportunity to deliver value by divesting the Western Landfill business while retaining an ongoing long-term earnings stream is highly attractive. Moreover, the sale of the landfill business to TPI, who require additional landfill capacity to deliver on their strategy, provides for a genuine win-win outcome for both companies,’ said Mr Kane.

Boral’s Deer Park Quarry, which has an expected life of 40 to 50 years, as well as the company’s asphalt, concrete and related operations located at the same site as the landfill business in western Melbourne, will continue to be owned and operated by Boral.

The sale is subject to customary conditions, including clearance by the Australian Competition and Consumer Commission (ACCC).