In a twist to the ongoing big-bang sale of a controlling stake in KKR-backed Re Sustainability Limited (formerly Ramky Enviro Engineers Limited), US private equity firm TPG, which was part of a three-way consortium along with NIIF and CPPIB, has dropped out of the race, people familiar with the matter told Moneycontrol. The target, a Hyderabad-based integrated resource management player, is seen as the largest Indian private firm in the waste management segment.
The development leaves behind three players who are still in the fray, namely NIIF, CPPIB and rival suitor I Squared Capital, these people added.
It wasn’t immediately clear if French environmental services MNC Veolia would explore a joint bid with I Squared Capital as indicated earlier by Moneycontrol on April 23. The same report had added that TPG & CPPIB held talks for a joint bid (NIIF joined them later).
Please Read: KKR-backed Re Sustainability's sale: TPG, CPPIB, Veolia, I Squared Capital in talks to form consortiums
Earlier on April 17, Moneycontrol was the first to report that KKR had re-launched the divestment process of Re Sustainability post an internal rejig.
Please Read: Global funds queue up for mega sale of Re Sustainability; KKR seeks $ 2 bn-plus valuation
“TPG is not pursuing the deal anymore and has opted out. Due diligence is still going on,” one of the persons above told Moneycontrol.
A second person confirmed the above.
With the exit of TPG, the focus now shifts to the strategy of two of the remaining consortium partners NIIF and CPPIB.
“The binding bid deadline for the proposed transaction has been extended to early or mid-August. NIIF is in pause mode for now and evaluating the scenario. It will be interesting to see if NIIF and CPPIB continue to jointly proceed in the absence of TPG. This is a big cheque and hence partners are key, though individual bids cannot be ruled out,” a third person told Moneycontrol.
According to a fourth person, “Alternatively, CPPIB also has the option to partner with I Squared Capital if deemed fit. No final call has been taken as yet on the tie-ups and it’s a developing situation.”
A fifth person added, “Earlier PE suitors which had expressed interest in the transaction, like Bain Capital, Advent International and Blackstone have gone slow or dropped out of the deal. The final, revised bids for Re Sustainability are likely to be lower than the original ask due to a valuation mismatch and aspects linked to the eventual exit strategy of bidders and may slip below $1.5 bn.”
The five persons above spoke to Moneycontrol on the condition of anonymity.
When contacted, KKR, TPG , I Squared Capital, CPPIB and Bain Capital declined to comment. An email query to NIIF and Re Sustainability remained unanswered at the time of publishing this article. Moneycontrol could not elicit an immediate comment from Blackstone and Advent International.
Incidentally, CPPIB is an LP (limited partner) to funds of I Squared Capital and recently, invested alongside the latter in a $3.4 bn power generation deal in Peru.
Last month, the government of India committed an additional Rs 30,000 crore to NIIF, strengthening its ability to scale fundraising and mobilise long-term capital into sectors of national importance.
Barclays and JP Morgan are acting as the sell-side advisors on the sale of Re Sustainability, sources had told Moneycontrol earlier.
Moneycontrol has broken multiple stories earlier at different stages of the Re Sustainability sale process.
A TPG- NIIF-CPPIB combine along with four other suitors, I Squared Capital, Blackstone, Bain Capital and Advent International had been shortlisted for the due diligence stage of the deal, Moneycontrol later reported on May 14.
On May 6, Moneycontrol also reported that six non-binding offers had been submitted by the TPG-CPPIB-NIIF combine, Blackstone, Advent International, I Squared Capital, Bain Capital and Macquarie Asset Management. The report had added that early bids were likely to be in the range of $1.6 bn to $1.8 bn, even though the valuation ask from the sell-side was higher.
The KKR Re-Sustainability Saga
KKR announced the acquisition of a 60 percent stake in the firm in August 2018 for $530 million. Back then, it was the largest buyout by a PE fund in India’s environmental services sector.
This is a fresh sale attempt by KKR which has been invested for nearly 8 years, to make a full exit from the Hyderabad based portfolio firm following an earlier strategic review in 2021, which had explored both the stake sale and IPO routes.
The proposed transaction follows a demerger of Re Sustainability Limited, as part of which the municipal solid waste management business was separated and sold back to Alla Ayodhya Rami Reddy. The official nod for the internal reorg from the NCLT has been received.
According to a Moneycontrol report dated October 14, 2024, the NCLT monitored scheme of arrangement of Re Sustainability, was approved by the firm's board for sharper focus.
"The scheme envisages splitting the operations into the "retained business" encompassing industrial waste management, biomedical waste management, recycling, environmental services, facilities and auxiliary services, as well as environmental and sustainability consultancy services and the "demerged business" which consists of municipal solid waste management and waste-to-energy operations," the report had said.