UPDATE 2-Beijing Capital buys Transpacific's NZ waste business for $800 mln

Mon Mar 3, 2014 2:45am EST

* Transpacific sells NZ waste business to Chinese state-run firm for NZ$950 mln

* Sale gives Beijing govt access to pollution-reducing technology

* Transpacific can now refinance debt, consider return to dividends

* Unit is biggest waste management firm in New Zealand

By Byron Kaye

SYDNEY, March 3 (Reuters) - Beijing Capital Group will buy New Zealand's biggest waste management firm from Australia's Transpacific Industries Group Ltd for almost $800 million, enabling the Chinese state-owned company to acquire technology that could help combat chronic pollution in the capital and beyond.

Demand for waste management is growing in China as the government launches a raft of measures to tackle environmental degradation, which has become a politically sensitive issue.

Transpacific's New Zealand waste business specialises in environmentally friendly landfill methods, odour management and hazardous waste handling.

"The Chinese understand how to recover the plastics and the metals from landfill and reuse them," said Mark Glover, director of Australian waste management consultants Eco Waste Pty Ltd. "The model now needs to be expanded so that we start looking at all the biomass and organic materials."

Much of Northern China was blanketed in a toxic smog recently, and the authorities raised the pollution alert to its second-highest danger level after drawing public ire for its ineffective response to the crisis.

China's government will spend 100 billion yuan ($16.3 billion) over three years to deal with the pollution in Beijing, according to state media reports. It also aims to treat 90 percent of all urban waste by the end of 2015, housing ministry data shows.

Australia and New Zealand waste management companies are well placed to benefit from China's demand, as they are experienced in landfill technologies and sustainable waste management because of government levies that encouraged these practices, analysts say.

People with knowledge of the Transpacific sale said Beijing Capital Group (BCG), which is owned by the Beijing municipal government, was keen on tapping Transpacific's expertise, and had not bought the waste management unit for re-sale.

"The investment carries significant...mutual technical and commercial benefits," BCG Chief Executive and Deputy Chairman Wang Hao said in a statement.

The deal comes just over a year after Hong Kong's family-owned Cheung Kong Infrastructure Holdings bought Envirowaste, New Zealand's second largest waste management company behind Transpacific, for NZ$490 million.

TRANSPACIFIC ALSO BENEFITS

The sale also advances Brisbane-based Transpacific's push to exit non-core businesses and focus on its Australian waste management operations. Transpacific can now refinance its debt and resume paying dividends, the company said in a statement, adding that it expected the sale to be completed in June.

Transpacific sold the unit for NZ$950 million ($798 million). In August, Transpacific sold its commercial vehicles business to U.S.-based Penske Automotive Group for A$219 million ($195.97 million).

A source told Reuters last week that BCG had been up against three other bidders for the New Zealand business, including private equity giant Carlyle Group, a consortium involving investment manager Morrison & Co, two Maori tribes and infrastructure investor Infratil Ltd, and another unnamed bidder.

BCG was advised by HSBC Holdings Plc and Deutsche Bank ran the sale for Transpacific.