Brambles seeks buyer for CHEP pallets recycling operations

Australia-based Brambles Limited has announced its intention to divest itself of its recycled CHEP pallets business in North America, which operates as CHEP Recycled. In an August 2017 news release, Brambles says it is willing to take a more than $240 million “impairment charge” to divest CHEP “following the completion of a strategic review.”

According to Brambles, CHEP Recycled provides a network of pallet management services in the United States and Canada that supplies and recycles more than 90 million pallets annually. Brambles acquired its U.S. recycled pallet business as part of the global acquisition of IFCO Systems in March 2011. The Canadian recycled whitewood business, known as Paramount Pallet, was acquired in November 2011.

“Our strategic review highlighted that CHEP Recycled is not a core part of Brambles and that the business has not delivered the financial returns we require to generate sustainable shareholder value,” says Brambles CEO Graham Chipchase. “In addition, under new ownership, CHEP Recycled could be operated with a lower cost structure, providing it with a competitive advantage and access to additional revenue opportunities not currently available. For these reasons, we believe that CHEP Recycled’s overall returns and growth outlook are more likely to improve under alternative ownership.”

Adds Chipchase, “Going forward, we will focus on Brambles’ value proposition as the world-leading provider of supply-chain logistics solutions based on the provision of reusable pallets, crates and containers. With this in mind, we will retain the CHEP Recycled facilities that assist with the repair and recovery of our pooled pallets, ensuring we keep the synergies achieved in our U.S. pooled pallet business to date.”

Brambles says it is seeking to divest the 80 plants and TPM (total pallet management) sites that currently serve its recycled pallet operations. As part of the transaction, approximately 2,200 employees who work at those sites will transfer to new ownership on completion of the sale.

Brambles intends to retain the 73 pooled pallet service centers and TPM sites currently managed by CHEP Recycled, with approximately 1,400 employees remaining with Brambles to manage those sites, according to the company.

The company also says it expects to declare a $244 million non-cash impairment charge pertaining to the CHEP Recycled assets, which will be recognized in in its fiscal year 2017 financial statement as a “significant Item in discontinued operations.”