Legislation will be introduced to the NSW Parliament today enabling the sale of state owned waste business WSN Environmental Solutions. Treasurer Eric Roozendaal said the decision to proceed with the transaction followed a comprehensive strategic review that considered factors such as the performance and readiness of the business, market conditions and transaction structure. Speculation now turns to who is best placed to buy the company.

The NSW Government confirmed its intention to offer WSN to the market in November 2008. Roozendaal said enabling legislation – the Waste Recycling and Processing Corporation (Authorised Transaction) Bill 2010 – will be tabled in the Lower House today and considered by Parliament over the coming weeks, prior to the launch of the sale process.

“The sale of [WSN] means public funds can be better directed to frontline infrastructure,” said Roozendaal, adding the company operates in an “increasingly competitive market along with private sector operators”.

In a statement he pointed out there is “also increasing demand for the development of Alternate Waste Technology (AWT) facilities, which play a critical role in diverting waste from landfills”.

“[WSN] has taken a lead position in the development of AWT facilities, but the government believes the private sector is best placed to make the ongoing technology development and capital investment needed in this growing industry.”

Roozendaal said the proposed sale would also address the conflict between the government being both owner and regulator of the business, a source of long running industry frustration.

“The sale of [WSN] means the government can focus its efforts in core community services rather than in a waste business the private sector is both willing and able to operate,” he said.

Employee protections will be put in place similar to those adopted for other transactions, such as NSW Lotteries, and the government claims “the fair and equitable treatment of [WSN] employees will continue to be an important consideration for government as this transaction progresses”.

There has been industry speculation about the sell off of WSN for many years. In February Roozendaal announced the appointment of Christopher Berkefeld as its new chair, citing his “expertise in the preparation of corporations for sale and the execution of sales and mergers”.

Berkefeld managed the mergers of Brambles Industrial Services and Cleanaway in 2004, the sale of Brambles in 2006 and the sale of Cleanaway in 2007.

“Berkefeld will be working closely with the WSN Board and management to prepare the corporation for a possible sale transaction in the second half of 2010,” said Roozendaal, adding the appointment will end on December 31, 2010 “to cover the period of the possible sale”.

The value of its Sydney landfill assets will be the key determinant of WSN’s pricetag. The 2008 report on landfill capacity and demand by Wright Corporate Strategy – which the government refuses to make public - would obviously be a very useful document for anyone seeking to value the company.

Transpacific Industries head Terry Peabody has repeatedly expressed interest in buying WSN, although the debt levels the company incurred through a string of earlier acquisitions saw the company battered through the global financial crisis, and many in the industry question its appetite – or ability – to take on another large purchase.

Veolia Environmental Solutions broke WSN’s monopoly on the Sydney disposal market by getting its Woodlawn Bioreactor off the ground, and there’s little doubt company head Doug Dean would enjoy taking control of the company. Again, however, industry scuttlebutt suggests it may not find the cash needed to put in a winning bid.

SITA Environmental Solutions is considered the best placed of industry rivals, with WSN’s AWT assets considered a neat fit for the company.

Communications head Simon Lee told Inside Waste SITA considers it a “strategic acquisition” that would supplement its current portfolio of assets, and confirmed the company will “be going through due diligence to put in a bid”.

The dark horse in the bidding process are private equity players. Despite the fact many are still licking their wounds from the global financial crisis, and credit markets remain tight, there is little doubt the sale will attract interest on this front – it is hard to ignore the attractiveness of the regular cash flows waste management companies bring in.

American buyout specialist KKR surprised the market in 2006 by snapping up Australia’s biggest waste player, Cleanaway, before selling it back to Transpacific Industries a year later (making a tidy $250 million profit in the process).

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