CVC Capital in Deal Talks With Australia’s Brambles as Logistics Assets Stay Hot

SYDNEY — One of the world’s largest suppliers of wooden pallets for transporting goods in the supply chain has been targeted by European private equity firm CVC Capital Partners.

Brambles Ltd.

BXB 11.22%

, which has a market value of about $11.4 billion, said on Monday it was in early talks with CVC about a deal that would represent the latest push by private equity firms to own logistics companies and repair supply chains damaged by the Covid-19 pandemic. The Australian listed company has a large North American business, supplying pallets to more than 24,000 retailers.

Brambles, which is listed on the Australian Stock Exchange, did not say how much CVC is willing to pay to acquire the company in a regulatory filing confirming Australian media reports that discussions are ongoing. . CVC, which is re-establishing its Australian office in 2021 after a nine-year absence, did not immediately respond to a request for comment.

Logistics has become a hotbed for private capital investment after the pandemic highlighted weaknesses in existing supply chains, with shipments sometimes stuck at ports or held up for weeks. before reaching the destination.

Globally, private equity has invested $50.6 billion in logistics by 2021, according to PitchBook Data Inc., a company that collects information on private fund investments. That’s more than triple the amount invested in 2020 and 34% higher than in 2019. PitchBook data shows companies have invested an additional $9.1 billion in 74 deals this year. through early May, even as private equity trading performance slowed due to high inflation, rising interest rates and concerns about China’s economic outlook.

CVC’s tilt in Brambles also highlights Australia’s appeal to private equity, and it follows several other major deals by competitors. A consortium led by KKR & Co. Inc. Head has made a proposal to buy Ramsay Health Care Ltd.

, which owns private hospitals in Australia, Europe and Asia. Slat Inc.

recently received approval from Australia’s foreign investment watchdog to acquire casino operator Crown Resorts Ltd.

Operating globally under the CHEP brand, Brambles owns approximately 355 million pallets to move goods around the world. It has remained profitable throughout the pandemic and last month lifted its annual earnings guidance, saying it expected annual underlying profit to grow 6% to 7% from the current financial year, ending ends June 30.

Brambles has blamed disruptions in the freight and lumber markets for the flow of goods in supply chains and driving up costs. However, management says the price increase has helped offset those cost pressures.

The company also faces a decision whether to commit to using more plastic pallets, which has unsettled some investors worried about the costs involved. CVC’s takeover method sent Brambles’ share price up 11% on Monday.

Brambles said it expects to announce by the end of June whether it will push the switch to plastic pallets after testing with major customer Costco Wholesale. Corp.

, interested in change. Plastic pallets are stronger and lighter than wood, but more expensive to manufacture.

RBC Capital Markets analyst Owen Birrell this month said he expects the project to go ahead but it will cost about $1.1 billion to set up a group of plastic pallets.

Write letter for Stuart Condie at stuart.condie@wsj.com

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Edmund DeMarche

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