Cleanaway shares lift after ACCC paves way for $377m acquisition of Contract Resources
Make us a preferred source
Make us a preferred source on Google
More news: Shares in Cleanaway increased after the Australian Consumer and Competition Commission said it would not stand in the way of a proposed $377 million acquisition of industrial waste services business Contract Resources.
Cleanaway’s share price had increased 1.45% to $2.79 by 1:19pm AEST.
ACCC greenlights Cleanaway's $377m takeover of Contract Resources
The news: The Australian Consumer and Competition Commission (ACCC) has greenlit Cleanaway Waste Management’s proposed acquisition of industrial services provider Contract Resources Group citing low barriers to entry in the oil and gas sector.
The numbers: Cleanaway agreed to buy Contract for $377 million in a fully debt-funded deal in March. At the time Cleanaway said the merger with its own industrial waste services business would generate $12 million in annual net cost synergies.
The context: The acquisition is expected to be completed on 31 July.
Cleanaway and Contract mainly compete for the supply of industrial maintenance and cleaning services to the oil and gas sector.
However, the ACCC’s review found that Contract primarily provides specialist industrial services such as catalyst handling, which Cleanaway does not supply. Further, the ACCC believes that the merged entity would continue to face competition from alternative suppliers.
ACCC commissioner Philip Williams noted that oil and gas sector customers “are generally large, well-resourced organisations that could sponsor new entry or sponsor the expansion of existing rival suppliers”.
The competition regulator also found that it is “unlikely to be a profitable strategy” to leverage Contract Resources’ strong position in supplying specialist services by requiring its customers to contract other Cleanaway services because there are alternative specialist providers.
What they said: “Contract Resources is a highly strategic acquisition that when combined with our Industrial Services business, creates a leading provider of integrated, specialised technical services to customers in the oil and gas, resources and industrial sectors,” Cleanaway chief executive and managing director Mark Schubert said.
The sources: ASX, ACCC media release
