Due Diligence For Hardware Acquisition

Project: HTH Stores Due Diligence: Minimising environmental liability in a limited time frame

Client: HTH Stores Pty Ltd (a joint venture subsidiary of Woolworths Limited and Lowe’s Companies Inc)

Situation: HTH Stores planned to acquire Hudson Building Supplies and its portfolio of hardware stores throughout NSW and Queensland. HTH engaged Geo-Logix to undertake the environmental assessment of Hudson’s 15 commercial/industrial hardware sites; there was no information available on the condition of the onsite buildings or the environment.

Some of the sites covered more than three hectares and the due diligence period was limited. There was neither the time, nor the financial resource, to assess the sites in the manner prescribed in the National Guidelines for the Assessment of Site Contamination.

Action: Geo-Logix divided the sites into regions and assigned three project engineers. They reported to a project director who maintained daily contact with the client. The team completed Phase I Environmental Site Assessment and Hazardous Building Materials reports for the 15 sites and it became evident that some of the sites would be contaminated.

Unqualified contamination is a liability. Geo-Logix had to qualify the contamination risk quickly and efficiently in a process involving the following:

• Developing a risk assessment matrix for each site taking into consideration the site-use history, potential contaminants and exposure pathways
• Applying technical knowledge and experience in contaminant fate and transport to differentiate high-risk and low-risk contaminants and activities
• Identifying contamination which would trigger notification to the authorities
• Eliminating five sites from further assessment based on qualitative risk assessment
• Performing targeted risk assessments on the remaining sites employing a variety of sampling methodologies
• Using passive gas soil samplers to efficiently and cost effectively screen the large sites for chemical contamination from volatile liquids
• Employing a hand-held analyser for quick and easy identification of asbestos materials in the surface soils
• Identifying contamination issues in some of the sites including petroleum-impacted groundwater and asbestos in surface soils
• Undertaking further investigation of two sites to qualify the environmental liability
• Implementing groundwater modelling on one site to estimate the risk of the groundwater contaminating the adjacent creek
• Helping draft environmental clauses into the Contract of Sale resulting in reasonable and attainable environmental contractual obligations for both parties.

Result: Geo-Logix took five months to complete the due diligence works to a standard where HTH Stores could confidently proceed with the acquisition. Geo-Logix understood the broader commercial objectives of the project and the client’s tolerance to risk. Communicating effectively about the environmental process and its limitations were key to the success of the project.