Biffa set to be sold to ECP for £1.3 billion

In a statement called “recommended cash offer”, Biffa said that ‘Bears Bidco Ltd, a newly incorporated company controlled by funds managed by affiliates of ECP (Energy Capital Partners) V, LLC’ is recommended to acquire Biffa for 410 pence in cash per Biffa share.

The acquisition value represents a premium of about 28% on the closing price of 325 pence when the offer was made on 6 June 2022.

But, the deal value is not as high as it could have been because of ‘reservations’ included in the announcement by Biffa in June when it disclosed that it could have liabilities including under the UK’s landfill tax regime.

At the time, this was valued at £1.4 billion (see letsrecycle.com story).

I&C

The industrial and commercial collections market looks to be high on the list for future development by Biffa as well as more acquisitions. ECP said it intends to support Biffa’s management in their efforts to continue developing the business “by investing in the customer offering and future growth of its footprint, both organically and through targeted bolt-on acquisitions, such as supporting Biffa with its plan to consolidate the fragmented I&C collections market in which Biffa is a leader”.

In a statement, Biffa said that ECP has been investing in “energy transition, environmental infrastructure, and sustainability-focused businesses for almost two decades.

ECP believes that Biffa fits its investment criteria well due to Biffa’s position as a leader in UK sustainable waste management, underpinned by a strong national brand and extensive service coverage led by an excellent management team and backed by powerful barriers to entry. ECP also places significant value on the strength of Biffa’s relationships with its broad stakeholder base, its long-term track record, and its central role in supporting energy transition and the circular economy.”

ECP: Biffa requires “patient, sustained capital investment  predicated on a long-term investment horizon”

In the statement, reference is made to ECP’s views. ECP, it says, believes that Biffa requires “patient, sustained capital investment  predicated on a long-term investment horizon.”

With a long-term view of capital allocation, Biffa will be best positioned to thrive in its key markets, which are underpinned by long-term growth drivers including the UK Government’s policy objectives to increase plastics recycling and re-use, eliminate avoidable waste and achieve 65 per cent. recycling of municipal waste by 2035. These drivers and the importance of effective waste management more generally have been re-emphasised in the 2018 Resources & Waste Strategy, the Waste Management Plan for England published last year, and the Environment Act 2021.

Successful

Commenting on the acquisition, Ken Lever, chair of Biffa, said: “Since IPO in October 2016, the successful pursuit of our growth strategy has seen Biffa expand its leadership position in its I&C collections business and oversee a significant investment programme across UK green economy infrastructure, strengthening its capabilities as one of the leading sustainable waste managers in the UK.

“ECP is an experienced investor in environmental infrastructure and sustainability assets and offers a supportive environment to accelerate the Group’s further development and growth as a leading enabler of the circular economy.

“Whilst being lower than the proposal previously announced on 7 June 2022, it is the Biffa Board’s view that this offer represents a compelling opportunity, particularly in a weakening economic environment, for shareholders to realise, in cash and with certainty, the potential for future value creation.”

Focused

Commenting on the acquisition, Andrew Gilbert, partner of ECP, said: “ECP is excited to begin this long-term partnership with Biffa and its extremely talented employees and leadership. We intend for Biffa to remain focused on providing the high level of service to which its customers have become accustomed and look forward to supporting Biffa’s strategic initiatives, development, growth and industry leadership.”

ECP

Founded in 2005, ECP is a global investment firm with more than $26 billion in capital commitments from more than 600 limited partners and a portfolio of more than 20 operating equity portfolio companies that serve customers around the world. ECP specialises in investing in operating companies across energy transition, electrification and decarbonisation infrastructure assets, including power generation, renewables and storage solutions, environmental infrastructure and sustainability, efficiency and reliability assets.