State-backed Chinese firm leads £1bn Biffa chase
Reports say that at least one other suitor, from South East Asia, is also in late-stage talks about a £1 billion takeover of the British waste disposal business.
Talk of a sale started last year, with Sky News reporting in November that the group was asking prospective bidders to table offers, with Biffa shareholders also considering a stock market floatation in the second quarter of 2016. The report suggested that the group would be seeking approximately eight times its annual profit – around £950 million – from any sale or stock market move.
Biffa’s owners, the American investment firms Angelo Gordon, Avenue Capital and Sankaty Advisors, had previously appointed financial advisory group Rothschild to prepare its listing for a public stock floatation in 2016.
Last week (28 February) a report in The Sunday Times stated that the potential Chinese buyer, described as ‘state and private enterprise’, is currently edging ahead in discussions.
A deal with the Chinese firm, the report suggested, would provide the company with a foothold in the Asian market, with Ian Wakelin, Biffa’s Chief Executive, previously stating his desire to move into overseas markets.
Indeed, when Rothschild was appointed in May 2015, Wakelin told the Financial Times that the floatation would provide capital to invest in new plants and international expansion, initially in Mexico, where the company is looking to open its first landfill gas site.
When sale rumours surfaced in November, the firm, which currently only serves British clients, posted a 19.4 per cent increase in earnings before tax. It reported six-month earnings up to 25 September of £67.2 million, with a revised full-year profit expectation of £119 million, up from £109 million in 2014. In the same period, overall revenue rose to £465 million, £14 million more than 2014.
Turnaround in fortunes
Founded in 1912, Biffa employs more than 6,000 people and operates 2,500 collection vehicles. It was bought from water company Severn Trent plc by three investment firms in 2008 for £1.7 billion.
The business was then sold on to its current investment firms in 2012. The sale led to a restructuring of the company. As well as reducing the firm’s debt, the investment groups also provided a £75 million injection into the company to fund a new infrastructure programme.
Since the restructuring the company has ‘enjoyed a turnaround in fortunes’, now handling waste from 2.5 million households and 94,000 commercial customers.
Despite uncertainty about its future ownership, Biffa has made a number of acquisitions this year, including PHS Chemical Waste, with facilities in Burscough, Stevenage and Atherstone, and Enviroco’s Chemical Treatment Division, providing a hazardous waste fleet and waste transfer facility in Sheffield.
More information about Biffa can be found at the firm’s website.