Cheung Kong Infrastructure Holdings (CKI), controlled by Hong Kong's richest man Li Ka-shing, has bought a loss-making New Zealand waste management firm for NZ$490 million (HK$3.18 billion).
On Monday, CKI entered into an agreement to fully acquire Barra Topco, the Hong Kong-listed firm announced yesterday. The deal is pending the approval of the New Zealand government and CKI shareholders. Currently, Barra Topco is 59.51 per cent owned by Envirowaste Holdings, a Belgian firm, and 30.88 per cent by two Australian pension funds, namely Ironbridge Capital II A and Ironbridge Capital II B. CKI will finance this acquisition with its internal resources, bank loans and other financing channels.
Barra Topco is one of the two leading waste collection and disposal firms operating across New Zealand, serving half a million residential and commercial customers. Barra Topco posted a net loss of NZ$18.98 million in the fiscal year ended 30 June 2012 and a net loss of NZ$11.66 million in the fiscal year ended 30 June 2011. It had a net liability of NZ$47 million as of 30 June 2012.
"The acquisition reflects the company's strategy of investing in infrastructure opportunities around the world, leveraging the company's strong financial position and solid experience in infrastructure," CKI said.
Standard & Poor's Rating Services estimates CKI had HK$7 billion in cash and bank deposits as of the end of last year.
"We expect this acquisition to contribute a steady cash flow to CKI from this year," the international credit rating agency said. "Although waste management is unlike the infrastructure assets that CKI has typically invested in, [Barra Topco's] predictable demand, strong market position, and above-average profit margin underpin the solid business fundamentals of this new asset."
Standard & Poor's said CKI's investment grade rating had not been affected by this acquisition.
"CKI's above-average appetite for acquisitions is a key rating weakness for the company. The strong to excellent business profiles and stable cash flow generation of the assets it usually targets partially moderate the weakness," Standard & Poor's added.
Last November, CK Life Sciences International, another Hong Kong-listed company controlled by Li, bought Australia's largest salt company, Cheetham Salt, for A$150 million (HK$1.22 billion).
Li-controlled firms have in recent years bought a string of British utility companies.