16 September 2016 by Tom Goulding

Shanks makes merger ‘progress’ despite UK challenges

Shanks Group has confirmed ‘significant progress’ has been made towards its proposed merger with continental competitor van Gansewinkel Groep BV in a trading update issued today (16 September).

But, in the UK, Shanks is continuing to experience ‘market and operational challenges’ across its municipal division, including its Derby energy from waste project.

Shanks is considering a merger with its Dutch competitor van Gansewinkel Groep BV

Shanks is considering a merger with its Dutch competitor van Gansewinkel Groep BV

At present, van Gansewinkel is considered the largest waste and recycling business in the Benelux region – which includes Belgium, the Netherlands and Luxembourg – while Shanks is third in size.

A ‘reverse takeover’ of the company by Shanks was first proposed in May when it asked for its shares to be suspended while it considered the acquisition. A proposed merger between the two companies was then announced in July (see letsrecycle.com story).

Talks regarding a merger between the businesses are still ongoing, with a binding exclusivity agreement between Shanks, van Gansewinkel’s parent company VGG Holdco BV and its two largest shareholders extended ‘for a short period’ past an initial mid-September deadline.

In material terms the merger remains unchanged, but the headline value of van Gansewinkel has increased in line with the appreciation of Shanks’ share price from 81 pence on 23 May to 102.25 pence yesterday (15 September).

The share increase implies that van Gansewinkel, which was previously valued at €440 million at the time of the announcement on 7 July, would now be valued at €484 million on a debt-free, cash-free basis.


Since the firm’s last trading update in July, the Shanks board expects to deliver results for the year ending 31 March 2017 in line with expectations.

In the Netherlands, Shanks’ commercial division has continued to ‘perform well’ since July particularly in the volumes of demolition and construction waste as well as from its organics waste segment. While recyclate prices remain subdued, the Belgium business has also performed well and demand for solid recovered fuel (SRF) is ‘significantly up’ on last year.


However, the Group continues to encounter problems with its municipal division in the UK – with a ‘resultant impact on profitability’. Ongoing reductions in the available SRF market and increasing costs – due to fluctuations in the exchange rate – in the export of refuse-derived fuel (RDF), has further impacted margins.

Shanks' Wakefield plant, which has yet to reach 'targeted profitability'

Shanks’ Wakefield plant, which has yet to reach ‘targeted profitability’

Shanks has also encountered issues with its UK infrastructure projects. In July, the business was informed that the insolvency of one of Interserve Construction Ltd’s main contractors could lead to a ‘six-month delay’ to commissioning of the Derby gasification facility. Both Interserve and Shanks make up Resource Recovery Solutions (RRS) the joint venture behind the plant.

The PPP-funded £145 million plant has been developed as part of a contract between Shanks and Derby city and Derbyshire county councils. The firm had previously told letsrecycle.com it remained “committed” to ensuring the plant opens as planned in spring 2017 after the technology supplier to the facility, Energos, entered administration in July (see letsrecycle.com story).

The update states: “While Shanks is largely protected from the impact of this insolvency as it is not involved in the construction of the project, there will be a financial impact in the second half of lost commissioning profits along with an expected £1.7m of liquidated damages.”


Elsewhere, Shanks claimed it has encountered difficulty in generating profits from its operations at the recently-opened Barnsley, Doncaster and Rotherham (BDR) and Wakefield facilities as ‘quickly as expected’ – the latter due to the insolvency of subcontractor Imtech in 2015, which had delayed the 230,000 tonnes-per-year project.


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