Brambles, GKN unveil $10b merger

C.K. Chow will run the merged business group from Sydney

In this story: Identical boards and senior management teams Reason behind the merged interests RELATED SITES

By CNN's Ian McMinn

SYDNEY, Australia (CNN) -- Australian transport and logistics group Brambles Industries and UK engineering group GKN are merging their support services into one group valued at $10 billion.

The group, which will have annual revenue of about $3.5 billion and debt of $1.85 billion, will be dual-listed on the London and Australian stock exchanges as Brambles Industries plc and Brambles Industries Ltd.

Brambles shareholders will have 57 percent of the combined group and GKN shareholders 43 percent.

To reflect the 57:43 ratio and to ensure economic equivalence of shares in the dual-listed companies, Brambles will issue additional shares to shareholders on a three-to-one basis.

Shares in Brambles, which were halted earlier in the day ahead of the announcement, closed Thursday at A$50.00, for a gain of A$1.25 or 2.5 percent.

The nil-premium merger sees Brambles' existing activities merged with GKN's share of two joint ventures -- the Chep pallet business and Cleanaway waste removal business -- along with GKN's wholly owned business Chep business in South Africa and its Interlake and Meineke operations. This will operate as Brambles Industries Ltd.

GKN will separate its support services activities from its engineering operations and place them into a new UK company, Brambles Industries plc.

Brambles said it expects that Brambles Industries Ltd and Brambles Industries plc will then combine under a dual-listed structure in Australia and the United Kingdom.

Identical boards and senior management teams

The companies will have identical boards.

Brambles's chairman Don Argus will also become the chairman of Brambles Industries plc. His deputy chairmen will be Sir David Lees, currently the chairman of GKN, and Mark Burrows, currently Brambles' deputy chairman.

The companies will have a single management team headed by chief executive, Sir C.K.Chow, currently GKN's chief executive, who will relocate to Sydney, the headquarters of the combined business.

Announcing the merger, Don Argus emphasized Brambles and GKN had enjoyed a close commercial relationship for nearly 30 years.

Reason behind the merged interests

"The key strategic factor behind this is the desire of Brambles and GKN to achieve global leadership in the support services business," said Argus.

"Our agreement to proceed with this merger represents a collective view that it is logical and inevitable."

Retiring Brambles chief executive John Fletcher said the merger offered a means to unlock the value of joint-venture assets owned by Brambles and GKN.

"The proposed merger will facilitate global growth and enable a more logical approach to the funding of our businesses," Fletcher said.

Fletcher also said Brambles was making good progress divesting non-core businesses.

The merger is subject to the approval of shareholders in both companies and relevant regulators.

Brambles Global Industrial Services
GKN plc

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