Brambles Limited (ASX: BXB) shares are edging higher this morning following the company's latest ASX announcement. At the time of writing, the Brambles share price has climbed 0.75% higher to $10.76.
Image source: Getty Images
Why is the Brambles share price climbing today?
The Brambles share price is on the move in early trade after the company announced a merger of its Kegstar business with MicroStar. Kegstar is Brambles' keg rental business while MicroStar is a leading United States beer keg solutions provider.
Brambles' business is a participant in the global beer keg rental sector operating across Australia, New Zealand, the United Kingdom, Ireland, the Netherlands and the US. MicroStar will look to capitalise on synergies in the similar 'pay per fill' business models used by both companies.
Brambles will hold an approximate 15% stake in the merged entity with the remaining 85% retained by MicroStar's existing shareholders. These include Freeman Spogli, a growth-focused private equity firm based out of Los Angeles, USA.
MicroStar is set to purchase Kegstar at an enterprise value of US$52.2 million and issue shares in MicroStar to Brambles. The proposed merger remains subject to foreign investment approval in Australia and New Zealand with expectations this will be finalised by June 2021.
The coronavirus pandemic "significantly impacted" the Kegstar business as reported by Brambles last year. The group's FY2020 results noted a "slow recovery" in the Kegstar business due to widespread lockdowns and operational inefficiencies.
Whilst the Brambles share price is edging higher in early trade following the news, shares in the logistics group remain down around 16% over the last 12 months while the S&P/ASX 200 Index (ASX: XJO) is down 2.7% over the same period.
Foolish takeaway
The Brambles share price is climbing higher this morning following the company's merger announcement. The merger of the Kegstar and MicroStar businesses will create an even larger global keg rental operation.
Brambles will retain a 15% stake in the combined entity's operations and recognise that as an investment on its books.
