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Brambles to Demerge Document Business

-- Brambles expects spun off Recall to list in December -- Issues profit warning for Recall -- Analysts value business at more than US$1 billion -- Brambles shares rise 3% SYDNEY--Brambles Ltd. (BXB.AU) said it would spin off its Recall business after failing to sell the unit last year amid Europe's debt crisis, in an industry where new technologies such as cloud computing are threatening the traditional document storage and destruction business. Sydney-based Brambles said Tuesday it now aims to list the demerged business, Recall Holdings Ltd., on the Australia's stock exchange in December. Shares in the world's biggest supplier of wooden pallets, used to transport goods ranging from autos to fruit, rose more than 3% as investors bet the split would allow the company to invest in more profitable parts of its business. Although storing hard copies of some documents is mandatory in legal and accounting circles, some firms are opting to keep valuable documents in digital form, posing a challenge for companies like Recall and rival Iron Mountain Inc. (IRM). Brambles terminated the sale of Recall in June last year as bids fell short of the US$2 billion it had hoped to raise. "(Recall) has a strong and stable customer base, it produces strong cash flow, it covers its cost of capital and it has strong growth opportunities," Brambles Chief Executive Tom Gorman said Tuesday. Macquarie Group analysts estimated Recall's market capitalization would be between 1.1 billion Australian dollars (US$1.02 billion) and A$1.25 billion. The demerged company would also have about US$450 million in debt, Brambles said in a statement. Mr. Gorman said the threat to earnings from digital storage had been overstated by analysts. Medical practitioners, financial services firms and government departments were among those still required to keep physical documents, he said. "We see more paper being generated." Still, Brambles on Tuesday forecast that Recall's underlying net profit, which strips out one-off items, would fall to between US$138 million and US$142 million in the year ending June 30, down from US$174 million a year earlier as demand remained weak--especially in debt-ridden Europe--and prices for shredded paper fell. Bank of America Merrill Lynch and UBS AG have been hired to advise Brambles on the demerger. Write to Ross Kelly at ross.kelly@wsj.com Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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