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Brambles cancels Recall auction

by Paul Whitfield | Published June 4, 2012 at 9:27 AM

Australian pallet maker Brambles Ltd. has pulled plans to sell its document-handling operation Recall Inc. after bidders failed to meet its asking price of about $2 billion.

The decision comes a week after Sydney-based Brambles missed a second deadline for the sale as negotiations dragged on with potential buyers, reported to include Canada's Shred-it International Inc., Ohio-based Cintas Corp. and buyout shops.

"Amid challenging capital markets conditions, and following complex negotiations, offers from bidders for Recall did not reflect its value or offer sufficient certainty," said Brambles chairman Graham Kraeche in a statement. "The Board concluded that it is in the best interests of Brambles' shareholders to retain Recall, which is a profitable and growing business."

Brambles had hoped to offload Recall to help pay down $3.2 billion of debt, much of it taken on last year when Brambles paid $1.3 billion for Ifco Systems NV, a German logistics company owned by London-based Apax Partners LLP.

The failure to sell Recall leaves Brambles with a hole in its budget that it plans to plug by selling A$448 million ($432 million) of new shares at A$6.05 per share. The price represents an 11% discount to Brambles Monday closing price of A$6.79.

Existing shareholders will have the option to buy one new share for each 20 of their existing shares. The offer will be fully underwritten by UBS and Bank of America Merrill Lynch. The two banks picked up the business having earlier been tapped to find a buyer for Recall.

Brambles put Recall on the block in November last year, when it talked up the prospects of a sale, noting that interest from both "private equity and strategic buyers was high." But offers failed to meet Bramble's expectations as instability in Europe, linked to the ongoing uncertainty about the future of the euro and stagnating economic growth, cooled investor interest.

The failed sales process will cost Brambles a total of $25 million, including $6 million of costs already booked.

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