Cleanaway Waste Management

Cleanaway Waste Management (ASX: CWY) has taken a centre-stage position when it announced about entering into a Scheme Implementation Deed to acquire 100% of the shares on issue in smaller rival Tox Free Solutions (ASX: TOX) by way of a scheme of arrangement (Acquisition) as unanimously recommended by Tox’s Board of Directors. This led TOX shares to move up about 19% on December 11, 2017.

The Acquisition has been indicated to be made via a 100% cash offer of $3.425 per share. This represents a 27.5% premium to Tox's 10-day VWAP, a 28.0% premium to Tox's 1-month VWAP and 34.7% to Tox's VWAP since FY17 result. This values TOX at $831m. The transaction is signalled to be 10.0x FY17 EBITDA on a pre-synergies basis for TOX, with integration to deliver $35m in annual synergies over 2 years with total synergies fully reflected in FY21.

Further, CWY has gone for an Equity Raising to fund the acquisition wherein company's shareholders are asked for subscribing 1 new share for every 3.65 existing shares held on 13 December 2017 at the offer price of $1.35 per New Share (Offer Price), representing an 8.2% discount to last close price on 8 December 2017. Remaining will be funded with debt drawn from refinanced facility.

It is worth noting that regardless of whether the Scheme is implemented or not, TOX’s shareholders will be entitled to an interim dividend for FY18 equal to $0.05 per share if they continue to hold their shares on the record date for that dividend, which is expected to be in March 2018; and payment of the interim dividend will not impact the Scheme Consideration.CWY will also permit TOX to give a special dividend but with a corresponding reduction in acquisition price.

The acquisition is expected to be complete by 2Q CY18. Despite this update, CWY will pay consistent dividends in FY18 and will increase payout ratio to the lower end of 50-70% payout range.


Potential from Combined Capabilities (Source: Company Reports)

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