Battle for Biffa: suitors aim to gatecrash deal
Saturday 09 February 2008
A takeover battle is set to erupt for Biffa with up to three suitors close to gatecrashing a £1.2bn private equity deal accepted by the UK waste group.
Yesterday Biffa's board recommended the 350p-per-share bid tabled last year by a consortium comprising Montagu Private Equity, Global Infrastructure Partners and UCIL, a subsidiary of HBOS. However, within hours it emerged that the private equity groups Terra Firma and CVC Capital Partners, as well as the French industrial and services company Suez were considering making counter-offers.
Shares in the waste group stormed up over 12 per cent to 369.5p, making it the top riser on the FTSE 250, in anticipation that the offer would prove the starting gun for a bidding war. One trader said: "There is an expectation in the market that there will be a rival bid."
Several companies were linked with a potential bid. Terra Firma, the private equity group that owns EMI, is understood to be carrying out due diligence, while Suez is also believed to be running the slide rule over a possible bid. A source close to the French group said: "Suez has looked, but it is all at quite early stage at the moment."
CVC is also understood to be very interested in Biffa, while Macquarie has also been linked with a bid, although one source close to the Australian investment group poured cold water on the speculation.
All of the companies declined to comment.
Biffa, which has beefed up its defence team with the investment banking advisers Citigroup, JP Morgan Cazenove and Tricorn, said yesterday it had "also received approaches from third parties regarding their potential interest in making an offer". It added that the suitors had been granted access to due diligence information. A source close to Biffa's defence team said: "The feeling is that a further bid is entirely possible."
Montagu first revealed its interest for Biffa, in partnership with the private equity house Hg Capital, last November, and several weeks later the target's board announced that it had rejected a 330p-per-share bid from the consortium. Biffa's board agreed to open its books after the bid was raised to 350p per share, a 43 per cent premium to the pre-bid speculation share price.
The consortium was disrupted last month when Hg unexpectedly walked away, over concerns about the way the deal was structured. Global Infrastructure Partners, which had been expected to launch a rival bid, took its place in the consortium.
Yesterday, the board decided to recommend the bid, saying it "has not received a proposal from any third party at this stage nor can there be any certainty that a formal offer will ultimately be forthcoming from any of them".
Montagu, which already has a presence in the sector through its acquisition of Cory Environmental from ABN Amro for £588m, said it had followed Biffa since it demerged from Severn Trent in 2006. The group, which has over €3bn in funds and assets under management, was spun out of HSBC Group in March 2003.
Global Infrastructure Partners' previous investments in the UK include the acquisition of London City Airport. Global, whose total committed capital is worth $4.1bn, was founded by General Electric and Credit Suisse in 2006.
Kevin Lapwood, a research analyst at Seymour Pierce, said the offer may appear generous, but it was still not enough. "It is a start, but we do not believe this is the end of the process. There are still several infrastructure investors that would pay more and we still believe that a price closer to 400p per share is more realistic," he said.
A source close to the deal said: "The shareholders now know they've got 350p in the bank. Management is now looking to see ifthey can boost that value further."
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