Biffa agrees to private equity takeover

Waste collection and recycling firm Biffa agreed to be taken over today in a private equity deal valuing the company at more than £1.2 billion.

Biffa's board backed the 350p a share offer after rejecting a number of other proposals from Montagu Funds over the past four months.

Montagu knows the sector well as it formerly owned Cory Environmental, a rival business with a number of landfill sites and local authority contracts.

Biffa, which was spun off from Severn Trent in 2006, has 86 depots and collects more than four million tonnes of waste a year from around 75,000 industrial and commercial customers and over one million households.

Waste companies are seen as attractive targets because they benefit from long-term visibility on contracts, as well as from a bottle-neck on environmental projects as the UK attempts to meet EU landfill targets.

The business has launched national paper, card and glass collections and recycling services for its industrial and commercial customers, and is offering a treatment service to firms who do not want to pre-sort their own rubbish to meet the rules.

The regulations are designed to reduce the amount of non-hazardous waste sent to landfill sites. Buckinghamshire-based Biffa. which has 42 treatment and recycling centres and 33 landfill sites, reported operating profits of £90.7 million in the year to March 30. Revenues were £742.7 million.

Montagu is working on the bid with Global Infrastructure Partners, a fund previously involved in the 2006 takeover of London City Airport.

Today's offer is 20p a share higher than Montagu's opening £1.12 billion takeover proposal, which was rejected by Biffa in November.

Bob Davies, non-executive chairman of Biffa, said the new proposal recognised the "considerable value" inherent in the company's market position.

However, Seymour Pierce analyst Kevin Lapwood said it was possible rival bidders could emerge.

He added: "There are still several infrastructure investors that would pay more and we still believe that a price closer to 400p is more realistic."

Montagu sold Cory Environmental to infrastructure investors in March after acquiring the waste business from Exel in 2005. Cory has nine landfill sites and contracts for recycling, street cleaning and waste collection across the UK.