BXB

Our fairly astounding run of takeovers continues, here, BXB.

First, some navel gazing. Why would PE be interested in BXB?

Because BXB is the owner of lots of pallets, in a global pallet shortage, and, for reasons known more precisely only to Brambles, isn’t putting up its prices by anywhere near what it could.

BXB might well be following the long-run-practice-of-reciprocity. “I have the advantage for now, but it won’t always be that way, and I’d rather not be slashing prices when the shoe is on the other foot” type thing. Goodwill matters, and customers have long memories.

That’s the first reason.

But PE isn’t likely so LR goodwill oriented, and would be much more likely to leverage near term bargaining power.

Secondly, BXB could quite dramatically lower capex, improving near term returns & cashflows, and likely not suffer any immediate negative reaction (eg loss of share, irreparable decline of brand/product).

That’s appealing as an exit model: in 3-5 years time, a PE owner could hold out a very attractive set of financials to support an IPO.

3rd, the share price has been quite depressed of late, and range bound for much longer. It wouldn’t be too hard to get investors over the line with a (relative to lows) “generous offer”.

4th is some modest optionality around raw material input costs. Lumber prices are affecting everything from cashflows and profits to sentiment towards the stock (after all, pallets are made of wood). Current pricing gives you some optionality around them falling.

Back to us. We can add SKI, IRE, CWN, RHC, ALU and now BXB to our list of takeovers, and in addition, CIM and PDL which we’ve held in our concentrated portfolio.

That’s great, hopefully it continues.

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