The private equity owner of Dutch waste management group Attero has begun talks to sell it for around 1 billion euros ($1.1 billion) after being approached by several Chinese companies vying for technology to tackle the country’s pollution problems, several people familiar with the matter said.
Buyout group Waterland bought Attero for only 170 million euros in 2013 and had not intended to sell up yet but has changed course after receiving inquiries from multiple would-be acquirers, including some who bid in the sale of Germany’s Energy from Waste (EEW) earlier this year, the people said.
Waterland is working with Morgan Stanley (MS.N), which also led the EEW sale, and is targeting a broad range of strategic buyers and financial investors, they added.
Germany’s EEW, now owned by Beijing Enterprise (0392.HK), as well as Cheung Kong Infrastructure (CKI) (1038.HK) are expected to prepare bids for Attero. Belgium’s Indaver and France’s Suez Environnement, which both own Dutch waste assets, may also consider bids, the sources said.
The asset is also being marketed to Beijing Capital (600008.SS) and China Tianying (000035.SZ), which were outbid in the EEW auction. Tianying, however, is currently in the final stages of negotiating an acquisition of Spanish ACS’s (ACS.MC) waste management unit Urbaser and its appetite may therefore be limited, the sources said.
Attero processes 40 percent of Dutch household waste and describes itself as a leading player in creating energy from waste.
Chinese companies often need more time to prepare a bid and to secure backing from local authorities and are often allowed an early look at sales processes.
After an initial round at the end of August, final bids are expected by early October, one of the sources said.
Waterland, Attero, Indaver and Suez were not available for comment while the Chinese companies could also not immediately be reached for comment. Morgan Stanley and EEW declined to comment.
China has set a target to spend about $16 billion between 2013 and 2016 to improve sewage disposal and waste treatment as the government struggles to find ways of processing the enormous amounts of refuse the world’s most populous country generates.
Attero last year posted earnings before interest, taxes, depreciation and amortization of 133 million euros on sales of 339 million euros.
The company warned earlier this year that its profitability may come under pressure as several of its 20-year contracts are expiring in 2016 and 2017. Replacement contracts “will have much lower processing tariffs than the current ones,” the company said in March.
The contracts represent around 10 percent of the company’s portfolio, and Attero faces a one-off decline in EBITDA as a result. However, the location of its major plants near waterways and railways mean it will be able to contract to dispose of imported waste, which fetches higher gate fees than industrial or municipal waste.
Similar assets have fetched between 8 and 12 times core earnings in recent years. CKI bought AVR Afvalverwerking — the Netherlands’ largest waste-to-energy firm — for about 9 times core earnings in 2013. Indaver was bought at 8 times core earnings by Katoen Natie in 2015.
But EEW and Van Gansewinkel — which entered exclusive talks with Britain’s Shanks (SKS.L) last week — were both valued at more than 9 times their expected core earnings, while Fortum’s (FUM1V.HE) acquisition of Ekokem valued the company at more than 12 times.
Waterland is currently seeking a valuation of 9-10 times core earnings for Attero, the sources said.
($1 = 0.8998 euros)
(Editing by Keith Weir)