The largest pallet recycler in the United States was put up for sale last year when Brambles Ltd, the parent company of CHEP, announced it would be selling off its white-wood recycling division. In early January, Brambles announced a tentative deal pending regulatory approval to sell CHEP Recycled to Grey Mountain Partners, a private equity firm based in Colorado. The final sale price was US$115 million, which was much higher than the US$80 million revised carrying value of the net assets as detailed in a Brambles financial report.
The pallet rental giant wanted to divest its white-wood recycling business to focus on its core CHEP pallet rental business. Brambles just sold off the division at a low point after the white-wood business had to write down significant losses.
During the bid process, there were two major types of bidders – private equity funds with no pallet partner and national or regional pallet players with some sort of institutional investor backing them. In the end, Brambles sold to Grey Mountain Partners (www.greymountain.com), which is a straight private equity firm not attached to any one major pallet company. It is interesting that Brambles sold to an outside private equity firm and not an investor already connected to the pallet recycling sector.
So, what is the story behind Grey Mountain? It manages a $700 million investment portfolio and specializes in middle market companies. According to the company website, packaging has been a recent acquisition target. Grey Mountain appears to focus on buying companies where it thinks it can build up the enterprise or add value and then sell it off. Grey Mountain is currently investing from its third fund, which was raised in 2013. Some former affiliated companies that have been sold off include: Binswanger Glass, UTEX Industries, Herr-Voss Stamco and Stratix. Its current portfolio includes: Kronos Foods, Sunbelt Transformer, Fleetwood Industries, Dimex, Consolidated Glass Holdings and others.
CHEP Recycled currently manages 161 plants and total pallet management (TPM) sites, of which 73 sites service the CHEP Recycled business. Those 73 sites, together with approximately 2,400 employees, are included in the sale and will transfer to Grey Mountain Partners on completion. Brambles is retaining 88 plants and TPM sites that service the CHEP USA pooled pallets business. The transaction is subject to standard regulatory approval and is expected to be completed within 45 days.
