Transpac outlines savings from deal

Transpacific Industries has confirmed the synergies it is expecting from the proposed merger with Waste Management in an attempt to allay investor concerns.

Australia's Transpacific is offering $8.64 a share in cash to Waste Management shareholders in a deal which has raised debate about the difference between mergers and takeovers.

Under the amalgamation structure the deal needs 75 per cent shareholder support as opposed to the 90 per cent it would have needed under the Takeovers Code.

Rebecca Thomas, ING chief investment officer, said after meeting Transpacific advisers this week she would reluctantly support the deal despite disagreement about the valuation.

"We just don't see the price as being compelling", Thomas said.

"We've never been able to find a meeting of minds on our view of what a take-out price would be versus the view of the incumbent management who signed up to and effectively gave their recommendation to the offer before any independent report was struck."

The price ING had hoped for was between $9 and $10 a share but Transpacific has consistently said there would be no increase in the offer.

"We will not be making any alternative offer to Waste Management shareholders," Transpacific executive chairman Terry Peabody said.

In response to queries from investors and analysts Transpacific confirmed it expected the merger to generate A$10 million in business improvements and growth and A$20 million of synergies.

The A$10 million in business improvements and growth represented the underlying increase in existing Waste Management earnings for the 2005 financial year annualised into the 2007 full year forecast.

Transpacific said the earnings uplift was consistent with market consensus estimates for Waste Management and the financial forecasts included in the recent Grant Samuel appraisal report.

About half of the A$20 million of potential synergies were from corporate, administrative and operational cost reductions. Transpacific was confident it could achieve most of these savings soon after a completed merger.

The other half of the synergies included savings in transport costs through increased vertical integration and combined marketing programmes, which would take longer to achieve and were more uncertain.

A shareholder meeting to vote on the proposal will be held on May 17.