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Cleanaway Waste Management (ASX: CWY) has been given the green light to acquire the waste and recycling business of City of Melbourne Council’s Citywide Service Solutions for $110 million.
The deal, announced in June last year, has been approved by the Australian Competition and Consumer Commission which paves the way for Cleanaway to settle the transaction before the end of FY25.
Citywide Waste, which is owned by the City of Melbourne Council, provides collection services for municipal councils and commercial and industrial customers and also operates the Dynon Road transfer station which accepts large volumes of putrescible waste close to the Melbourne CBD, making it a key disposal facility.
Through the acquisition, Cleanaway will secure a 35-year lease for the waste transfer station located at 391-395 Dynon Road in West Melbourne.
As part of the deal, Cleanaway has committed to redevelop the Dynon Road waste transfer station into a larger facility at a cost of about $35 million with an additional $10 million contribution from the City of Melbourne over the first four years of Cleanaway's ownership.
Cleanaway has indicated that the expansion will almost double the facility’s current operating capacity, which it says will unlock “attractive earnings growth for shareholders”.
When announcing the acquisition last year, Cleanaway said Citywide Service Solutions would be “highly complementary” by expanding its collections business and its solid waste services infrastructure network in Melbourne.
ACCC’s investigation into the deal focused on how it would affect competition in the supply of putrescible waste disposal services in Melbourne for commercial and industrial waste.
“Our investigation looked at the central and west regions of Melbourne in particular because we were concerned about the loss of competition between Melbourne Regional Landfill and the nearby Dynon Road transfer station located in these regions,” says ACCC Commissioner Dr Philip Williams.
“We reached two key conclusions from our investigation. First, those customers with larger waste collection trucks are able to optimise their waste collection routes to divert volumes to landfills and transfer stations other than the Melbourne Regional Landfill and Dynon Road transfer station.
“This means that should Cleanaway own both facilities, larger collections customers would still be able to take waste volumes to other competitors if needed.”
Williams says that while some customers prefer the Dynon Road transfer station due to its closeness to the Melbourne CBD and ease of access for smaller waste collection trucks, these customers don’t see Melbourne Regional Landfill as a viable alternative at present.
“We therefore found that the acquisition is unlikely to have an impact on those customers,” he says.
As a result, the ACCC found the proposed acquisition would be unlikely to substantially lessen competition in the supply of putrescible waste collection and disposal services for both commercial and industrial waste, and municipal waste in Melbourne.
The ACCC expects rival landfills and transfer stations in Melbourne to continue to compete for waste volumes with Cleanaway after the acquisition.
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