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CHEP parent company Brambles to acquire IFCO

by Chip Carter | November 16, 2010
In a boomerang deal befitting its Australian roots, Brambles Ltd., the parent company of Orlando, FL-based CHEP Equipment Pooling Systems, announced the planned acquisition of Netherlands-based IFCO Systems NV, a leading provider of reusable plastic containers in 23 countries and pallet management services in the United States, after letting that company go in 2006.

The planned acquisition will be subject to regulatory approval, a process that is expected to take up to nine months. CHEP and IFCO will continue to operate as separate entities during that period. If the deal is approved, the new entity will represent nearly a quarter of the U.S. pallet business. Brambles' annual revenues would rise to $5 billion, of which more than $4 billion would come from pooling and pallet services. The Brambles group would have more than 16,000 employees, working in 49 countries across six continents under the "CHEP," “IFCO,” “Recall,” “LeanLogistics” and “Unitpool” brands.

In a Nov. 15 press release, CHEP Americas Group President Jim Ritchie said, "This transaction represents a tremendous opportunity for our customers that supports our growth plans in RPCs and pallets. Our customers can expect no service interruptions during the regulatory review period, and significant service enhancements in the medium to long-term, including product and service innovation and greater value delivery."

Brambles Chief Executive Officer Tom Gorman added in the press release, "The purchase of IFCO represents a unique opportunity for Brambles to enhance its position as the world’s leading pooling solutions provider and acquire operations with a strong growth profile. IFCO is a natural fit with Brambles’ existing RPC and pallet businesses and will allow us to continue to deliver on our strategy of diversifying our revenue base by product platform, geography and customer type."

"IFCO was a very solid player in the space here in the U.S., Derek Hannum, marketing director for CHEP, told The Produce News. “When we sold them the RPC business, essentially it enabled them to focus on growing and nurturing that emerging market and enabled us to spend time concentrating our resources on growing the pallet-rental business in the U.S. If you look at everywhere we operate in the world, there is a lot of nice fits here strategically, not only from operational synergies but also expanded services to our customers, opportunities to expand our reach into their operations and find new ways to reduce costs and improve their flows of product through the supply chain and reduce product damage. There is not a lot of overlap between where our business is strong in the U.S. on the pallet side - it’s very complementary so we think it’s going to be a very nice fit."

In Europe and Asia, RPCs are the preferred method of shipping. CHEP spun off its RPC arm in 2006 because U.S. acceptance of RPCs was low. In the years since the deal was made, an increased focus on sustainability and food safety have made U.S. retailers and growers more amenable to the technology.

"It was just strategic imperative that we grow our container business and expand our product line and that was communicated by Brambles several months ago," Mr. Hannum said. "It is a perfect fit, not only in the U.S. but globally. The RPC business is experiencing really strong growth in almost every market, and we expect it to grow in the U.S. If you look at the trends, the RPC business at IFCO has grown by a compound annual rate of 20 percent – that’s a trend line that is pretty apparent. If you look at it from a macro viewpoint, considering the pressure on cost and waste reduction and the increased focus on environmental sustainability, the RPC business just makes sense on a lot of levels."

Mr. Hannum said that CHEP customers are constantly asking the company for help in trimming costs and improving efficiency in shipping.

"We have to provide high levels of services that are very bottom line-focused," Mr. Hannum said. "You have to be very nimble and locked onto what your customers objectives are, and we think the RPC business is a very good fit for that. We know it is in Europe and it’s emerging in the U.S."

CHEP has "seen U.S. grower acceptance of RPCs increasing and improving over the years," Mr. Hannum said, and retail acceptance is "critical. Obviously they have to understand and value it and encourage its use, but in the time since we sold the RPC business to IFCO, it’s done nothing but grow. We’re excited to now be able to get back into that arena in the U.S. And in Europe and other countries we’ll see a combination of our existing networks so we’ll have an even more powerful network. I really enjoyed back in the day when we had the RPC business -- I thought it was a very exciting opportunity for us to work with produce growers and shippers on a new concept and it’s going to be fun to get back in that. We have a lot of strong valuable grower relationships with the pallet business today, and the IFCO guys have really built a very strong stable of customers. It’s going to be fun."