Biffa shares soar 25 per cent on £1.4bn takeover bid by US private equity firm
Biffa has received a takeover offer of around £1.36bn by a US private equity firm today, which sent shares in the waste management giant flying.
Biffa shares surged more than 27 per cent to 415p per share by close of play, just 30p shy of the offers stock value – and its highest since its float in 2016.
The solicited proposal by New York-based Energy Capital Partners (ECP) consists of 445p per share. Though analysts at Peel Hunt suspect there could be a counter offer looming.
London-listed Biffa had reportedly been talking with ECP about a potential takeover for some time. And has managed to negotiate a 37 per cent premium on Monday’s closing price.
“The board of Biffa has concluded that should a firm offer be made on the same financial terms as the proposal it would be minded to recommend it to Biffa shareholders,” the company said in a statement.
While Biffa looks like it will accept the offer, following necessary due diligence, the bid had pushed the company to admit that it could soon shoulder between £170,000 to £153m in tax liabilities, after HMRC launched an enquiry into how it classified waste at its facilities.
Biffa has rejected concerns but has been cooperating with the tax man’s probe, while also seeking advice from accounting giant EY.
No tax claim has yet been received from HMRC, the waste manager said. While there is a possibility that no claim will be put on the table.
Shareholders who bought Biffa’s stock at a now-bargain price of 210p during the pandemic, will be be pleased.
However, Biffa’s potential takeover adds weight to a growing trend of US bids for British businesses, which are later accused of being undervalue.
In a note, Peel Hunt wrote that it sees Biffa’s offer as “low for the quality and potential of the business but one that risk-averse invstors might choose to accept given a potentially significant tax dispute.”
It comes just days after Schroders, the majority shareholder in FirstGroup – which owns Great Western Railway – Sunday a £1.2bn takeover bid from US private equity firm I Squared Capital “unattractive”, adding that it failed to reflect FirstGroup’s weight in the railway sector.