By Geoffrey Smith
Investing.com -- Biffa (LON:BIFF) shares soared in London on Tuesday after the waste management company said it had received indicative proposals for a takeover from private equity group Energy Capital Partners.
The proposals, from ECP and various funds managed by it, imply a valuation of around 445 pence a share, a level that Biffa’s management said it would be inclined to recommend if a formal bid comes in. That would value the company at around 1.35 billion pounds ($1.69 billion).
Biffa said it has accordingly given ECP access to due diligence materials.
ECP’s decision on whether or not to proceed may hinge on the fate of an enquiry by U.K. tax authorities into how it classified the waste it put into landfill sites in the past.
HMRC has issued protective assessments that could lead to Biffa having to pay up to 153 million pounds plus interest and penalties. Biffa’s tax declarations have assumed a liability of only 176,000 pounds, by contrast.
The potential extra liability coming down the line was reflected in Biffa’s share price rally on Tuesday, which stopped well short of the 445p level. By 4:05 AM ET (0805 GMT), the stock was up 27% at 412.55. Tuesday’s price action brought the stock back to within a whisker of its all-time high of 419.50, posted last September.
Waste management is widely seen as a recession-proof activity, although that hasn’t stopped the stock losing around a quarter of its value since last summer as the U.K. economy has weakened and the risk of ‘stagflation’ has risen.
Biffa said in its statement that recent trading has been in line with its expectations, noting that it is ‘mitigating’ inflationary headwinds and making “good progress” in integrating recent acquisitions, which include an expansion of its production of food-grade recycled plastics, and the development of energy from waste projects.