-- Brambles expects spun off Recall to list in December
-- Issues profit warning for Recall
-- Analysts value business at more than US$1 billion
-- Brambles shares rise 3%
SYDNEY--Brambles Ltd. (BXB.AU) said it would spin off its Recall
business after failing to sell the unit last year amid Europe's
debt crisis, in an industry where new technologies such as cloud
computing are threatening the traditional document storage and
destruction business.
Sydney-based Brambles said Tuesday it now aims to list the
demerged business, Recall Holdings Ltd., on the Australia's stock
exchange in December. Shares in the world's biggest supplier of
wooden pallets, used to transport goods ranging from autos to
fruit, rose more than 3% as investors bet the split would allow the
company to invest in more profitable parts of its business.
Although storing hard copies of some documents is mandatory in
legal and accounting circles, some firms are opting to keep
valuable documents in digital form, posing a challenge for
companies like Recall and rival Iron Mountain Inc. (IRM). Brambles
terminated the sale of Recall in June last year as bids fell short
of the US$2 billion it had hoped to raise.
"(Recall) has a strong and stable customer base, it produces
strong cash flow, it covers its cost of capital and it has strong
growth opportunities," Brambles Chief Executive Tom Gorman said
Tuesday.
Macquarie Group analysts estimated Recall's market
capitalization would be between 1.1 billion Australian dollars
(US$1.02 billion) and A$1.25 billion. The demerged company would
also have about US$450 million in debt, Brambles said in a
statement.
Mr. Gorman said the threat to earnings from digital storage had
been overstated by analysts. Medical practitioners, financial
services firms and government departments were among those still
required to keep physical documents, he said. "We see more paper
being generated."
Still, Brambles on Tuesday forecast that Recall's underlying net
profit, which strips out one-off items, would fall to between
US$138 million and US$142 million in the year ending June 30, down
from US$174 million a year earlier as demand remained
weak--especially in debt-ridden Europe--and prices for shredded
paper fell.
Bank of America Merrill Lynch and UBS AG have been hired to
advise Brambles on the demerger.
Write to Ross Kelly at ross.kelly@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires