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Cleanaway Waste Management Ltd (ASX: CWY) is off to a strong start this week with its shares rising by 2% to AU$2.750 on the ASX 200 industrials index. The uptick in stock price follows the announcement of Cleanaway's strategic acquisition in Melbourne.
Cleanaway has entered into an agreement to acquire the waste and recycling business and assets of Citywide Service Solutions, known as Citywide Waste, for a total consideration of AU$110 million. As part of the transaction, Cleanaway will also secure a 35-year lease for the Dynon Road waste transfer station located in West Melbourne, solidifying its footprint in the region.
Citywide Waste is a key provider of waste management services in Melbourne, serving approximately 1,500 municipal, commercial, and industrial customers, including the Melbourne City Council. The Dynon Road waste transfer station, Victoria's second largest, processes over 200,000 tonnes of waste and recycling annually. Cleanaway plans to invest approximately AU$35 million to redevelop the site into a more efficient and modern facility, supported by an additional AU$10 million contribution from the City of Melbourne over the initial four years of ownership.
In the fiscal year ending February 2024, Citywide Waste reported EBITDA of AU$10.7 million and EBIT of AU$6.4 million, underscoring its financial performance and operational scale. Mark Schubert, CEO of Cleanaway, views this acquisition as a strategic opportunity to enhance the company's Solid Waste Services business in metropolitan Melbourne. He anticipates that integrating Citywide Waste into Cleanaway's network will generate significant operational efficiencies and facilitate growth in municipal and commercial & industrial waste collections.
Schubert emphasises that the acquisition aligns with Cleanaway's BluePrint 2030 strategy, which aims to drive sustainable growth and operational excellence through strategic investments and acquisitions. Securing the Dynon Road site positions Cleanaway strategically in inner-city Melbourne, tapping into densely populated areas and supporting future volume growth in post-collections infrastructure assets.
The acquisition is subject to regulatory approval by the Australian Competition and Consumer Commission (ACCC) and other customary closing conditions. Despite these pending approvals, Cleanaway shares have shown resilience, reflecting investor confidence in the company's strategic expansion efforts. Over the past 12 months, Cleanaway shares have gained 8%, underscoring positive market sentiment towards its growth trajectory and strategic initiatives.
As Cleanaway progresses with its acquisition of Citywide Waste and the redevelopment of Dynon Road, investors are watching closely for further developments and regulatory approvals. The strategic move not only strengthens Cleanaway's market position in Melbourne but also aligns with its long-term growth strategy, promising potential returns for shareholders as the company continues to expand its operational footprint and enhance efficiency in waste management services.
