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Waste Management NZ ownership juggles between Mainland China and Hong Kong

Tuesday 14th June 2016

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Chinese state-owned enterprise Beijing Capital Group plans to put a controlling stake in Waste Management NZ into a Hong Kong-listed company it also controls. 

Hong Kong-based Capital Environment Holdings shareholders will vote next week on a deal that would see the company buy a 51 percent stake in Waste Management NZ for US$234.4 million, filings to the Hong Kong stock exchange show. The transaction involves connected parties, with Beijing Capital indirectly owning about 55 percent of Capital Environment's controlling shareholder, Beijing Capital (Hong Kong). 

The deal would be the second overhaul of Waste Management NZ's capital structure since Beijing Capital bought it in 2014 for $950 million, or 5.17 billion Chinese yuan. The Chinese firm transferred a 65 percent stake to subsidiary Beijing Capital (Hong Kong) for $397 million in October last year.

The latest transaction values Waste Management NZ at US$470.9 million, or 3.06 billion Chinese yuan, and is expected to be completed in October. 

Capital Environment's board expect the acquisition will "substantially enhance the revenue base and profit base of the enlarged group", allowing it to expand into New Zealand and providing a blueprint it can copy in its existing Chinese operation. 

Waste Management NZ is New Zealand's biggest trash collection and recycling firm with more than 30 percent of the market and only one national competitor in Envirowaste Services, which was bought by Hong Kong billionaire Li Ka-shing's Cheung Kong Infrastructure Holdings in 2013 for $501 million. 

Separately, Waste Management NZ parent Beijing Capital Group NZ Investment Holding filed its 2015 financial statements with the Companies Office this month, showing the company generated a profit of $13.9 million on $444.8 million of revenue in the 12 months ended Dec. 31. During the year the company bought the 50 percent of Living Earth it didn't already own for $18.6 million, Gordies Bins for $2.3 million, and Waste Services Marlborough for $2.5 million.

The accounts show the New Zealand waste management firm has $699.5 million of related party debt with Beijing Capital Group entities which resulted in interest of $71.2 million in the year. 

The local earnings figures differ from those in the Hong Kong exchange filings, which include another level of holding company, and show the New Zealand operations posted a profit of $61.8 million on revenue of $445.4 million in calendar 2015.

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