The deal sees Shanks sell the business which collects, sorts and processes commercial and industrial waste in the UK to Biffa. It was first announced in October 2013 (see letsrecycle.com story) and has been completed following employee consultation and resolution of other routine regulatory clearances.
Completion of the deal effectively marks Shanks exit from what it had described as the challenging commercial waste market where it claimed that it was sub-scale and not positioned to win. However Biffa believes the business is complementary to its own portfolio.
Financially, the move is expected to generate net cash proceeds for Shanks of approximately 14 million including working capital receipts, with 8 million from the disposal assets and a further 6 million from the sale of MRFs in Blochairn and Kettering. It is expected that Shanks will benefit from an additional cash inflow of approximately 3 million following the acquisition.
Shanks Group chief executive Peter Dilnot has previously stated the MRFs, which have not been acquired by Biffa, are unlikely to be sold to the same buyer.
A trading update from November 7 2013 outlined the progress on this matter: As part of the exit from UK Solid Waste, we have entered into consultation with our employees to close and sell the Kettering and Blochairn MRFs. Kettering is expected to close within a few weeks, whilst Blochairn’s closure is expected to coincide with the completion of the Biffa transaction.
The process to sell the sites is well underway, with combined net proceeds expected to be around 6m after sale and closure costs.
Core focus
Shanks will now focus on its remaining four core divisions which are: UK municipal; organics; Benelux (Belgium, Netherlands and Luxembourg); and, solid and hazardous waste (see letsrecycle.com story). Mr Dilnot said he expected business and profits to double in the UK municipal division over the next five years with 200 million set to be invested in infrastructure through local authority contracts.
Shanks currently holds a number of large local authority contracts which are backed by PFI funding. One such contract is the 25-year, 750-million PFI-backed contract with the Barnsley, Doncaster and Rotherham Waste Partnership which was signed in April 2012 (see letsrecycle.com story). Shanks signed the deal in partnership with Scottish and Southern Energy.
The Group provides a range of recycling and energy recovery solutions to customers in both the public and private sector. The Group employs over 4,000 employees and handles up to 7.8 million tonnes of waste per year achieving an overall recycling and recovery rate of 78% in 2012.
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