Biffa agrees to takeover

Biffa, one of the UK’s largest waste collection and recycling firm, has agreed to be taken over in a private equity deal which values the company at £1.2 billion.

Biffa’s board backed the 350p a share offer after rejecting a number of other proposals from Montagu Funds. Montagu knows the industry well as it previously owned Cory Environmental, a rival business with a number of landfill sites and local authority contracts.

Following the news, shares in the company were up 10.7% while its competitor, Shanks Group was up 4.6%.

Biffa said it had continued to make good progress and its profit would be weighted towards resource recovery and landfill and power generation rather than collection as in 2006-07.

A spokesperson for Montagu said Biffa was a market leading business with a great workforce in a sector we understand well and where we have a demonstrable track record of success.

Biffa non-executive chairman, Bob Davies, said the buyers’ investment plans will help Biffa maximise the opportunities presented by changing legislation to deliver growth into the medium term.

Tricorn has been appointed by Biffa to advise, together with Citi and JPMorgan Cazenove, who are both also advising the unnamed third party.

Seymour Pierce analyst Kevin Lapwood said it was possible rival bidders could emerge adding that the offer valued Biffa at 23.5 times his forecast for 2008 earnings per share.

Mr Lapwood said this may appear generous, but we still maintain, it is not enough. There are still several infrastructure investors that would pay more and we still believe that a price closer to 400 pence is more realistic.

Biffa, which was de-merged from Severn Trent in October 2006, has 86 depots and collects over 4 million tonnes of waste each year from around 75,000 industrial and commercial customers and more than 1 million households.

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