June 4, 2012 / 12:52 AM / 5 years ago

UPDATE 2-Australia's Brambles scraps $2 bln sale of Recall unit

* Choppy markets, low offers behind decision to scrap sale

* Plans to raise $432 mln in equity at 10.9 pct discount

* Failed Recall sale results in pretax costs of $25 mln

* Shares on 3-day trading halt due to fund-raising

By Victoria Thieberger

MELBOURNE, June 4 (Reuters) - Australia’s Brambles Ltd , the world’s biggest pallet supplier, said on Monday it was scrapping a planned sale of its $2 billion Recall information management business because of low offers, adding to a long list of deals pulled due to choppy markets.

At least five large Asian IPOs were postponed or pulled last week, including the $3 billion listing of motor sport racing company Formula One in Singapore, as the euro zone crisis and slowing growth in China rattle financial markets.

Brambles said it will instead raise A$448 million ($432 million) in equity to retire debt after it abandoned the 10-month sale process for Recall that had attracted trade and private equity suitors.

“Things have changed as far as funding markets are concerned, but the quality of the business hasn’t changed,” said Ausbil Dexia Chief Executive Paul Xiradis. Ausbil, which has A$11 billion in funds under management, holds Brambles shares.

“They couldn’t get the figure they would have been happy with, so retaining it is the right option. Plus it would have been dilutive by them selling it,” he said.

The Recall sale process had been extended at least once, and Brambles said as far back as November that the sale would depend on international debt markets being sufficiently stable to enable bidders to secure finance.

“Amid challenging capital markets conditions, and following complex negotiations, offers from bidders for Recall did not reflect its value or offer sufficient certainty,” Brambles Chairman Graham Kraehe said in a statement.

PRIVATE EQUITY AMONG THE SUITORS

Brambles had valued the Recall business at around $2.2 billion, more than 9 times its earnings before interest, tax, depreciation and amortization (EBITDA) of some $240 million.

Sources told Reuters last month that Brambles had held talks with document destruction company Shred-it and Ohio-based Cintas Corp about Recall, but they also said negotiations were dragging out as investors shied away from Brambles’ price expectations.

Earlier in the year, several private equity firms, including Apollo Global Management, Thomas H. Lee Partners and Onex Corp, considered buying Recall but their interest cooled, also due to a substantial gap in valuations, sources said.

Brambles said it will undertake a 1-for-20 pro rata entitlement offer to raise A$448 million ($432 million) at A$6.05 per share, a discount of 10.9 percent to Friday’s closing share price.

The stock is on a three-day trading halt pending the fund raising. It fell 6 percent in May, in line with a slide in Australian shares which have been battered by euro zone debt woes and which were down 1.8 percent on Monday.

The fresh capital for Brambles would keep debt levels comfortably within the company’s conservative gearing levels, Ausbil Dexia’s Xiradis said.

The company also reaffirmed its 2012 fiscal year underlying profit guidance of $1.05 billion to $1.08 billion although that excludes pretax costs of about $25 million for the failed Recall sale.

Recall has some 80,000 customers worldwide, operating in over 20 countries and providing storage, retrieval and destruction of digital and physical documents, according to its website.

Bank of America Merrill Lynch and UBS AG advised Brambles on the sale process.

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