SITA UK expected to bid for Biffa

Maidenhead-based SITA UK is thought to have closely discussed a possible purchase with its parent company, French environment conglomerate Suez. However, because of the potential cost of the purchase the involvement of a partner has been seen as an option, partly because Suez has been involved in its own merger activities with Gaz de France, posing some uncertainty about its future waste portfolio and investment plans.

So, SITA UK is believed to have opted for a partner from the City of London with analysts and the media reporting today that an agreement had been reached to put in a bid with private equity firm Terrra Firma. The notion of such a bid has already seen Biffa's share price rise by 20p. Terra Firma has substantial knowledge of the workings of the waste industry – it bought Waste Recycling Group and later sold it on to Spanish group FCC. In the process of that deal Terra Firm separately dealt with the landfill gas operations of Terra Firma and a similar process could be possible with Biffa's landfill gas division.

March meetings

While Biffa has accepted a bid from WasteAcquisitionco, this does not mean that bids from other buyers are ruled out. However, any bids need to be made soon as shareholders meeting will take place in March and these could – if no other bids are made – see shareholders approving a sale of Biffa to WasteAcquisitionco.

Sources close to the latest developments told letsrecycle.com that an acquisition by SITA UK of Biffa would make sense. The activities of both companies complement each other – SITA UK has strong PFI interests while Biffa has relatively little; both companies desire to improve their share of the commercial and industrial sector and have faced some difficulties, merging the two operations would create a stronger business; and Biffa has a larger number municipal collection contracts than SITA UK. Biffa has a strong presence in landfill but lacks energy from waste, a sector in which SITA UK has considerable involvement.

Growth

SITA UK employs 5,000 people and in 2006 had a turnover of £600 million. Since then the business is seen making progress in the UK but has missed on some contracts and has been favouring growth through acquisitions.

In terms of head offices, Biffa is based only 10 miles from SITA meaning that some consolidation could bring savings. One expert told letsrecycle.com that a waste industry purchase of Biffa made more sense than a sale simply to a city fund because the waste sector sale would bring more efficiencies and earlier profits.