The report published by E&Y on Friday (1 March), arrives after Recycling Lives’ recycling and waste management assets were sold in a pre-pack agreement in January (see letsrecycle.com story).
The sale of the assets to Global Ardour Recycling was confirmed to be £15 million. The final figure for the sale of Recycling Lives’ Glasgow business was not disclosed, but offers of £11 million and £15 million were received.
Trading
Friday’s report explains that while Recycling Lives “historically traded profitably”, this was hit in in the 2022/23 financial year by a number of factors including a fire at its Preston site, market pressures, issues with its Glasgow business and high inflation.
The report also said that a trading strategy that focused on maximising volumes, especially in relation to the supply of scrap cars, was shown to have driven losses during the year.
Review
In April 2023, the report explains that Recycling Lives engaged EY’s corporate finance team to assist in preparing for a marketing and sales process for the group or its businesses.
However, a decision was taken to focus on “stabilising the business” and the process was paused.
In October 2023, it was confirmed that the sales process would be restarted.
Interested parties
During the initial marketing of the metals division of the company, 72 parties were considered to be credible purchasers and were contacted. This was initially focused on trade buyers, with finance buyers approached at a later date.
Of these, 41 parties entered into non-disclosure agreements and received information on the business.
Offers were subsequently received for the metals division split between the company’s Glasgow business and the remaining part of the metals division.
‘Poor performance’
However, in December 2023 “continued poor trading performance” saw increased levels of pressure on the group’s cash position, and as such created an “accelerated need” to quicken the process.
For the Glasgow business, there were two parties who were looking to complete the deal before Christmas of that year.
Offers of £11 million and £15 million were “considered sufficient to allow a solvent sale” of the Glasgow business to be achieved and to provide surplus funds to facilitate a sale of the remaining metals business though the same means.
However, the final offers for the Glasgow business “fell significantly short of the initial offers”, which eroded the previously agreed timeframes of selling the remaining assets.
The deal for the Glagsow business was completed in December 2023. This was later confirmed by letsrecycle.com to be S Norton (see letsrecycle.com story).
‘Worsening position’
Following completion of the Glasgow sale and “recognising a worsened forecast liquidity position”, the sale of the remaining assets of the company was accelerated.
Those previously contacted were then reached out to again to consider if they would be interested.
At this point, there were two parties interested. One was Global Ardour Recycling, which eventually bought the remaining assets (see letsrecycle.com story) and one other anonymous party.
Offers
Over Christmas, several site visits were undertaken and following a period of negotiation, the final offers received were as below for the metals business:
- £15 million from Global Ardour Recycling for the business and assets including stock, plant and machinery. This also included the transfer over of staff
- £14.7 million from a confidential party which excluded satellite sites and associated plant and machinery
- £15.3m from the same confidential party for the business including stock, machinery and satellite sites
The administrators then evaluated the offers and found that the GAR offer was “considered to present the least transaction risk”.
This was because negotiations with Global Ardour “were significantly more advanced” with purchase agreements and the offer included “substantially all of the business and assets”, leaving minimal asset realisation.
The administrators also noted that the offer “provided a better outcome” for preferential creditors.
The sale was confirmed by letsrecycle.com on 18 January (see letsrecycle.com story).
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