BINGO Industries has welcomed the Australian Competition and Consumer Commission’s (ACCC) announcement that it would not oppose Bingo’s proposed acquisition of Dial A Dump Industries (DADI).
It comes after BINGO accepted a court-enforceable undertaking from BINGO to divest its recycling facility in Banksmeadow, NSW.
Earlier this year, BINGO offered to sell its Banksmeadow processing plant to ease ACCC competition concerns regarding its $578 million purchase of Dial-a-Dump.
In August last year, BINGO announced it intended to acquire fully integrated NSW waste and recycling business Dial A Dump Industries for $577.5 million.
The acquisition includes its Genesis Transfer Station in Alexandria, Genesis Waste Facility (landfill, materials processing facility, and recycled products processing facility) at Eastern Creek and a collections fleet of 55 vehicles.
BINGO Managing Director and Chief Executive Officer Daniel Tartak said the ACCC decision was an important step in realising the company’s vision and five-year strategy to be a fully vertically integrated business and diversify into new markets in NSW.
“Our acquisition of DADI will not only be transformational for BINGO, but also for recycling in the greater Sydney region.
“Our development of a Recycling Ecology Park at Eastern Creek will allow us to process and recycle every type of waste, accelerate our vertical integration and compete more effectively with the larger local and international players.
“The ability to further consolidate more of our recycling, processing, distribution and landfill at a single site will deliver significant economic benefits. It allows us to further grow waste volumes, by freeing up space across our network of resource recovery facilities, some of which can be better utilised as transfer stations,” he said.
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DADI is a fully integrated recycling and waste management services provider in NSW. DADI has operations across the waste value chain from collections to recycling, landfill and recycled product sales. The principal asset is the waste management and resource recovery facility at Eastern Creek that spans approximately 55 hectares and is located in the Western Sydney growth precinct. It has an approved capacity of up to two million tonnes per annum between its resource recovery facility and landfill, and approximately 15 years of remaining landfill life.
BINGO expects to achieve run-rate cost synergies of around $15 million per annum through internalisation of waste volumes, operational efficiencies, and rationalisation of overheads over a two-year period.
ACCC clearance satisfies a condition precedent relating to the acquisition of DADI, and transaction settlement is expected to occur in March 2019.
“This will help ensure our vision for a more sustainable Sydney is realised, as we push for a waste-free Australia and move to build a circular economy through diverting waste from landfill,” Mr Tartak said.
“It will provide our customers with a better and more sustainable solution for both building and demolition (B&D) and commercial and industrial waste,” he said.
According to an ACCC statement, there are larger players than BINGO in the waste industry, such as SUEZ, Veolia and Cleanaway, but BINGO is the most significant player in Sydney B&D collection and processing.
“The transaction raised a number of significant concerns. Ultimately, we have concluded that the proposed acquisition, taking into consideration the divestiture undertaking, would be unlikely to substantially lessen competition in any market,” ACCC Chair Rod Sims said.
A key issue for the ACCC was the loss of competition in B&D waste processing in Sydney’s Eastern Suburbs and inner city.
“The proposed divestment of the Banksmeadow facility will maintain competition for B&D waste processing in Sydney’s Eastern Suburbs and inner city,” Mr Sims said.
The other key concern related to the removal of future competition between Bingo’s and Dial-a-Dump’s non-putrescible landfill.
“The Eastern Creek landfill site that Bingo will acquire is a strategically significant asset given that some of Sydney’s other dry waste landfills are due to close in the next few years and approval of new landfills is likely to be difficult,” Mr Sims said.
“The current practice of taking waste to Queensland will also become more costly after the introduction of the Queensland landfill levy.”
Post-acquisition Bingo is expected to hold a significant share of Sydney dry landfill in terms of both annual throughput and remaining airspace.
A key issue was whether Bingo would be able to stop competing B&D waste processors from having access to dry landfill at competitive prices due to its increased vertical integration.
“After an extensive investigation, including consultation with many industry participants, we considered that most building and demolition waste processors would have sufficient dry landfill alternatives to Bingo,” Mr Sims said.
Due to the introduction of the Queensland landfill levy, the ACCC considers it likely that Sydney dry landfill prices will rise this year regardless of the proposed acquisition. This will provide an incentive for increased recycling of B&D waste and incentives for more landfill capacity being made available in NSW.
BINGO announced that the board has approved the implementation of an on-market buy-back of up to $75 million of its ordinary shares.
As foreshadowed in BINGO’s half year results announcement, BINGO’s strong balance sheet together with the current trading value of BINGO shares supports the buy-back as a capital management initiative.
The buy-back is expected to commence on 15 March 2019 and will end 12 months from the date of this announcement.
The timing and number of shares purchased under the on-market buy-back will be contingent on Bingo’s share price and prevailing market conditions.