Sembcorp completes Veolia deal for S$19.2m

SEMBCORP Industries has completed the acquisition of Veolia ES Singapore (VESS) and the public cleaning business of Veolia ES Singapore Industrial for S$19.2 million, through its wholly-owned subsidiary SembWaste, it said on Tuesday.

The business to be acquired hold contracts for public and commercial waste and recyclable collections, which cover recovery and recycling, public and commercial cleaning services, as well as associated properties which include a materials recovery facility.

The consideration amount was arrived at after taking into account the earnings, book value of the business and existing contract values, Sembcorp said.

All conditions precedent including regulatory approvals were met, with the acquisition internally funded and fully paid for in cash.

The transaction is not expected to have a material impact on Sembcorp's earnings per share and net asset value per share for the financial year ending Dec 31, 2020.

Earlier in January, Sembcorp first said it was making the acquisitions for about S$28 million. In February, the company received clearance from the Competition and Consumer Commission of Singapore (CCCS) to proceed with the deal.

VESS's operations in Singapore include public waste collection and general waste collection services, overlapping with SembWaste's.

The CCCS had assessed that the merged entity would continue to face sufficient competition in the relevant markets from other suppliers in Singapore and overseas.

It noted that in Singapore, the National Environment Agency is the sole customer in the market for public waste collection, which suggests it may possess some bargaining power to constrain any increase in market share by the merged entity.

"Given that barriers to entry and expansion are not high, there remains a number of credible competitors who are capable of expanding in this market to compete with the merged entity," the CCCS added.

As for general waste collection services, the combined market share of SembWaste and VESS is below the CCCS's indicative threshold, which suggests that competition concerns are unlikely to arise from the merger, it said.

Customers are also able to switch suppliers and have a large number of alternative suppliers to choose from, it added.

Shares of Sembcorp ended Tuesday at S$1.75, down S$0.07 or 3.9 per cent before the announcement.