Shares in waste management business Biffa (BIFF) gained 6% to 294p as the acquisition of assets from rival Viridor continued its consolidation of the UK rubbish and recycling sector.
The company has entered into an agreement to acquire the collections business and certain recycling assets from Viridor Waste Management for about £126 million. The deal is being funded by the issue of £150 million of private placement debt at a blended interest rate of 2.73%.
‘This acquisition expands Biffa’s collections business and recycling capabilities while solidifying its leading position in UK sustainable waste management,’ the company said.
Completion is expected no earlier than August. ‘The addition of Viridor’s £85 million collections revenues builds on the group’s strong track record as the leading market consolidator in the highly fragmented I&C (industrial and commercial) collections market,’ the company said.
BIG EARNINGS BOOST EXPECTED
We discussed the investment case for Biffa in more detail in this recent article. Numis analyst James Beard is a big fan of this latest transaction. He commented: ‘We view this as a compelling strategic acquisition, adding density across Biffa’s I&C network, and view the £10 million synergy target as conservative.
‘Our initial modelling indicates the potential for mid-high teens percentage earnings per share accretion to 2023-2024 outer year forecasts.’
Beard added that ‘the acquisition of certain recycling assets means Biffa gains control of c.22,000 metric tonnes of plastic feedstock for its polymers business, underpinning its expansion there’.
