Is Biffa’s board too quick to call time on the company’s days as a listed company? Having played hard to get with a consortium of private equity bidders since September, the waste and recycling services company has finally agreed to sell out for £1.2 billion. However, in recommending the 350p a share offer from Montagu Private Equity and GIP Funds, Biffa has had to admit that a third party is still running its slide rule over the company’s books and could come up with a rival offer.
Biffa’s chairman Bob Davies said in a statement today that there was no certainty that any offer would emerge from this third party. In any case, he is not prepared to keep Montagu and its cohorts waiting any longer.
The market however believes there is something worth waiting for and has marked Biffa’s shares up 12.5 per cent this morning to 369p, some way above the offer price. News that Terra Firma, Guy Hands’s private equity business is looking at Biffa, only underlines that Mr Davies may have been pushed into a hasty clinch.
Terra Firma has form in the area of waste services. Mr Hands has got his hands dirty before, when it bought Waste Recyling Group, which it has since flipped. Terra Firma was one of the first companies to recognise that increasing environmental legislation would generate opportunities in this area. The combination of property and services, with highly visible cash flows, is one of Mr Hands recurring investment strategies - since his former days as a pub owner, when at Nomura.
If Mr Hands is interested in Biffa, you could expect other funds that are keen to invest in critical infrastructure to be considering raking through Biffa’s muck too. To demonstrate that Biffa is more than just a private equity turnaround candidate, the bidding consortium now includes GIP, the independent GE and Credit Suisse-backed infrastructure fund.
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Other infrastructure investors like Macquarie, the Australian fund, and GIC Special Investments - the private equity arm of the government of Singapore, could also take a second glance at Biffa.
The premium Montagu and GIP look prepared to pay looks, at 34 per cent, decent but given the shortage of quality infrastructure assets out there, investors might hope that Biffa holds out for more.