Introduction

On Monday 25 February 2019, the news hit the market that Brambles (BXB), one of the world’s most sustainable logistic businesses, had entered into a binding agreement to sell its IFCO reusable plastic containers (RPC) business to a subsidiary of the Abu Dhabi Investment Authority for a value of US$2.5 billion. The sale, a few years in the making, allowed Brambles to focus on its core business and pursue revenue growth in its core markets. Following the receipt of necessary regulatory approval, Brambles closed the deal on 31 May 2019.

The injection of cash from the sale transaction provided Brambles’ executives with an opportunity to review its capital structure with a view to create value for shareholders through enhancing Earnings Per Share (EPS). Accordingly, one proposal that was currently being considered by the executive team, led by CEO Graham Chipchase, was to use part of the proceed from the IFCO sale (US$2 billion) to repurchase shares. The stock repurchases returned the cash from the sale to shareholders while at the same time had the impact of reducing the number of shares outstanding. Further, to enhance EPS and to take advantage of low interest rates, the executive team also considered the issue of US$500 million in 15-year medium term note at an average interest rate of 3.3% per annum to bring the total amount of stock repurchase to US$2.5 billion.

If approved by the board, the stock repurchase would be at 10% discount to the 30-day volume weighted average price ending 28 June 2019.