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UPDATE 2-Beijing Enterprise buys Germany's Energy from Waste

Published 04/02/2016, 11:26 pm
© Reuters.  UPDATE 2-Beijing Enterprise buys Germany's Energy from Waste
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* Deal worth 1.8 billion euros including debt - sources

* Chinese shopping spree in Europe continues

* Beijing Enterprise beats other Chinese groups

* China needs top notch waste management technology (Adds details on valuation, deal advisers)

By Arno Schuetze

FRANKFURT, Feb 4 (Reuters) - Beijing Enterprise 0392.HK is buying German waste management company Energy from Waste (EEW) for 1.4 billion euros ($1.6 billion) as China sets about tackling its pollution and waste recycling problems.

The largest Chinese acquisition of a German company to date comes just weeks after ChemChina's acquisition of German industrial machinery maker KraussMaffei and underlines China's interest in German know-how. set a target to spend about $16 billion between 2013 and 2016 to improve sewage disposal and garbage treatment as the government struggles to find ways of treating the enormous amounts of refuse the world's most populous country generates.

ChemChina grabbed headlines on Wednesday with what would be China's largest ever overseas acquisition, a $43 billion bid for seeds and pesticides group Syngenta. familiar with the EEW transaction said it valued the German company at 1.8 billion euros, including debt.

This marks a healthy return for buyout group EQT, which bought EEW at a valuation of about 1.15 billion euros, acquiring half of the business in 2012 at a 1 billion euros valuation and the rest last year at 1.3 billion euros. acquisition is significant for China, as government researchers have estimated as much as 7 billion tonnes of waste is buried around China's major cities, and the capital Beijing is now surrounded by a belt of landfill sites known disparagingly as the "seventh ring road".

To ease the problem, China aims to convert 30 percent of its rubbish to electricity by 2030, up from less than 5 percent now. However, plans to build waste-to-energy plants have routinely been opposed by residents alarmed by pollution risks.

EEW has state-of-the-art emissions control technology and an efficient garbage collection management system. It has long-term contracts for accepting waste and for delivering energy and heat. Like energy grids or pipelines, it generates stable returns, making it attractive to waste management firms.

In a rare bidding war between Chinese groups for an overseas asset, Beijing Enterprise outbid a consortium of China Tianying 000035.SZ and Ping An 2318.HK , a consortium of Beijing Capital 600008.SS and German utility Steag, as well as Finnish utility Fortum FUM1V.HE . came in very close, the offer price of the runner-up was just two percent below that of the winner," a person familiar with the deal said.

For 2015, EEW is expected to post earnings before interest, taxes, depreciation, and amortisation of 190 million euros.

The deal values the company at 9.5 times its core earnings, roughly in line with the 9 times core earnings that China's Cheung Kong Infrastructure 1038.HK paid for AVR when it bought the Dutch energy-from-waste company in 2013.

EQT was advised by Morgan Stanley (N:MS) on the deal, while Lazard and UBS worked with Beijing Enterprise.

($1 = 0.8965 euros)

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