Acquisitions in the spotlight part one: Bingo Industries

Waste Management Review talks to some of Australia’s largest waste management companies about the role of scalability in the future of the waste sector. 

This article is the first in a three part series featuring Bingo Industries, Cleanaway, Corio Waste Management and SUEZ. 

Over the past few years, Australia’s waste management giants have looked to becoming vertically integrated businesses. One of Australia’s largest waste management companies, Cleanaway acquired health and waste disposal giant Toxfree in 2018.

Most recently, building and demolition (B&D) market leader Bingo Industries acquired Dial A Dump Industries (DADI) and set its sights on building a resource recovery park as part of the acquisition.

Cleanaway has also looked to potentially take on SKM Recycling after acquiring its debt for $60 million.

Waste Management Review explores the role of scalability and vertically integrated business models in the waste sector’s future.

BINGO TAKES IT TO THE NEXT LEVEL

Daniel Tartak, Bingo Industries Managing Director, believes that further market consolidation will support the waste industry during a challenging phase.

“The industry is still very fragmented. We’ve seen consolidation in the last few years, but there still needs to be some more consolidation over the sector across the country,” Daniel tells Waste Management Review.

“It still remains very competitive, even following these acquisitions [DADI and Toxfree]. I don’t think much is changing in the industry.”

Daniel says Bingo’s DADI acquisition allows the company to compete with the multinationals on a greater scale with vertically integrated assets. He says it comes at a critical time for the sector where recycling infrastructure investment is needed at a greater level.

“There’s many small players who don’t invest into their business and the sector, and right now we need that,” he says.

“We’ve done it to a large extent over the last few years. We’ve poured almost $1 billion into acquisitions and key infrastructure so as some of the smaller players start getting amalgamated or consolidated you will see more investment.”

Bingo Industries agreed to divest its recycling facility in Banksmeadow, NSW to ease ACCC competition concerns regarding its $578 million acquisition of DADI. The ACCC required Bingo to divest the facility to maintain competition for B&D processing in Sydney’s eastern suburbs.

Following this, the ACCC announced it would not oppose the acquisition after accepting a court-enforceable undertaking from Bingo to divest its Banksmeadow processing facility. CPE Capital was announced as the buyer for $50 million in September.

In announcing the company’s full-year results in August, Daniel noted that the asset base secured through the acquisition would transform the business for many years to come. Some of its most recent redevelopments include Bingo’s first recycling centre in West Melbourne, Victoria, having first entered the market in 2017 through several strategic acquisitions.

Its total network capacity, including contribution from the DADI acquisition, increased from 2.2 million tonnes in financial year 2017-18 to 3.8 million tonnes in 2018-19. It will be closer to 4.4 million tonnes by the end of 2019-20 allowing for Patons Lane and Mortdale redevelopments.

In 2019, Bingo reconfigured its NSW network as part of the DADI integration by rationalising some sites and converting others into transfer stations in a move to attract and aggregate waste volumes for processing at its advanced recycling centres.

Bingo expects solid growth in 2019-20 underpinned by a full-year contribution from its Patons Lane Recycling Centre and Landfill, West Melbourne Recycling Centre and DADI. The business also expects to benefit from the Queensland waste levy and associated pricing increases.

Bingo Industries, through the acquisition of Dial A Dump Industries, has set its sites on building a Resource Ecology Park in the middle of western Sydney.

Through Eastern Creek, Bingo is turning its attentions to building an 82-hectare Recycling Ecology Park in the middle of western Sydney to accept putrescible and non-putrescible waste at a large scale.

Strategically positioned near the Western Sydney Airport and the Sydney CBD, it currently can handle two million tonnes per annum and in the future will comprise a new C&I processing facility, refuse-derived fuel, alternative waste treatment facility and new recycled product manufacturing facility.

Daniel says that the new $60 million C&I processing facility at Eastern Creek, comprising the most sophisticated equipment in the world, should be operational in about 12 months’ time.

He points to the importance of a vertically integrated business model to maintaining a chain of custody on the movement of waste. Likewise, he notes a vertically integrated company allows for scalability.

“When you become a large business, the fact that you have a large quantity of waste can sometimes work to your detriment, so controlling access to collections, transfers, recycling and landfill gives you control over your business,” he says.

On questions of whether one company owning multiple assets is reducing choice for customers, Daniel says that this would only potentially be the case in a duopoly structure.

“You have six large players so there is plenty of choice even if companies control those assets. Even with consolidation over the last few years, the market is very fragmented. There’s still six big players and hundreds of small players.

“Every time you tender, you are facing five big opponents and a heap of different small private companies.”

Daniel says that through Bingo’s five-year plan, the company plans to build multiple recycling facilities. He says these will be able to handle all waste streams in the market from putrescible MSW, C&I waste to non-putrescible, C&I and B&D waste, separating them and then turning most of those individual waste streams into products to sell back to market.

It’s [Eastern Creek] a master integrated asset able to handle all waste streams, with a focus on landfill diversion. It will be one of Sydney’s key infrastructure assets, which the market will rely on to meet state recycling targets going forward,” he says.

As Bingo continues to grow, Daniel says the company intends to maintain its leading position in the B&D sector while at the same time expanding its C&I business.

“We’re five years old in the C&I sector and a relatively small player in NSW and Victoria, so we really want to grow that business in both states, but also geographically around the east coast of Australia,” Daniel says.

“We’ve (the waste sector) been out of sight, out of mind for too long and now is the time for industry to change and improve.”

Next week’s instalment features an interview with Cleanaway CEO Vik Bansal. 

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BINGO receives green light from ACCC for Dial A Dump acquisition

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.

 

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