SYDNEY: Cleanaway Waste Management Limited (ASX: CWY) has agreed to acquire the waste and recycling business and assets of Citywide Service Solutions Pty Ltd (Citywide Waste) for a total consideration of $110 million.

Cleanaway Waste Management will concurrently enter into a 35-year lease for the waste transfer station located at 391-395 Dynon Road in West Melbourne.

Citywide Waste provides waste management services to approximately 1,500 municipal, commercial, and industrial customers in Melbourne, including Melbourne City Council. Citywide Waste also operates the Dynon Road waste transfer station, Victoria’s second largest waste transfer station, located approximately five kilometres from the Melbourne central business district.

Annually, the transfer station receives over 200,000 tonnes of waste and recycling material. As part of the transaction, Cleanaway has committed to redevelop the Dynon Road waste transfer station into a larger, efficient, modern post collections facility. This is expected to cost approximately $35 million with an additional $10 million contribution from the City of Melbourne over the first four years of Cleanaway’s ownership.

Commenting on today’s announcement, Cleanaway CEO & Managing Director Mark Schubert said: “This transaction represents an attractive opportunity to expand our Solid Waste Services business in metropolitan Melbourne. Integrating Citywide Waste into our network is expected to deliver valuable efficiencies, while facilitating growth through the broadening of our municipal and C&I collections capabilities.

The re-development of Dynon Road will almost double its current operating capacity, unlocking attractive earnings growth for shareholders. It will also support future volume growth into our post collections infrastructure assets.

Securing this site in inner-city Melbourne provides a strategic position in the densely populated Melbourne metropolitan area and aligns with our approach of using M&A to accelerate the delivery of our BluePrint 2030 strategy. We are confident that the acquisition of this unique asset will deliver attractive returns to shareholders over the life of the lease.”

Citywide Waste generated EBITDA of $10.7 million and EBIT of $6.4 million in the twelve-month period ending February 2024. Subject to timing of completion, the acquisition is not expected to make a significant EBIT contribution in FY25. The earnings contribution on an integrated basis, including the post collections value of the volumes collected, is significant and expected to grow with the benefit of the additional capacity post redevelopment.

The transaction will be fully debt funded and Cleanaway remains committed to maintaining a strong group credit profile. The acquisition is subject to a range of conditions precedent including ACCC regulatory approval.

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