Who knew CHEP pallets were sexy prey. Corporate vultures, of course

Brambles’ critics don’t seem to think the plan is more complicated than using its large market share to pass on higher costs/prices to customers, finding a way to better keep track of the pallets in its pool (instead of losing them) and making sure any deals it does with big customers such as Costco contain terms that are financially favourable to Brambles.

The company talks about investing in digital technology to better track and optimise pallet movements – a strategy that has unassailable logic.

Mistakes aside, Brambles is a valuable company. It is the world’s largest pallet company – particularly in the domain of fast-moving consumer goods.

It has a global network of pallets and has some of the characteristics of an infrastructure company. It employs 12,000 people, owns 355 million pallets crates and containers and operates in 60 countries.

As a fixer-upper it’s a large important company that holds plenty of appeal for private equity. Brambles presents a great gearing up opportunity for any private equity company owner.

The challenge facing its chairman, John Mullen, is to ensure that the under-rewarded shareholders receive an offer that reflects its potential.

Brambles also dangled to investors the possibility of “other strategic options… to maximise shareholder value”. Without providing any hint as to what this might be, the statement is tantalising but fairly meaningless.

Having activist shareholders such as Perpetual in the mix applies an additional layer of pressure.

It is in shareholders’ interest to have Brambles in play and to actively encourage potential suitors to play their cards. They will be leading the charge to lean on the Brambles board into allowing suitors to conduct due diligence.

From Perpetual’s perspective an outcome that results in it cashing in on an underperforming investment.

Second prize for shareholders will be to activate the Brambles’ board wake-up alarm to let it know that doing nothing is not an option.

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