We seem to be facing the Great British Take Off when it comes to UK companies being acquired and delisted from the stock market. Biffa looks to be the next candidate to be served up a takeover offer from private equity, implying it could leave the stock market for the second time in its history.
The company started out life as a haulage business supporting coal fired power stations. It was acquired by Severn Trent in 1991, demerged in 2006 and subsequently floated on the UK stock market. Two years later it was bought by a private equity consortium. In 2016 the company relisted and more recently caught the market’s eye thanks to the surge in interest for anything ESG-related.
“It’s easy to see why private equity would want to own Biffa. Its services are in demand whatever the economic climate and a lot of inflationary pressures can be passed on to customers thanks to inflation-linked pricing structures for many of its contracts,” AJ Bell investment director Russ Mould said.
“Strategically it has made good progress with investments in plastics recycling and energy from waste services. Steady money coming in, an opportunity to increase scale and an undemanding equity valuation are all key attractions for private equity and Biffa ticks these boxes.
“Buying Biffa is a no-brainer compared to Ted Baker whose preferred acquirer has pulled out of the race to snap up the troubled fashion retailer. It would take a lot more work to generate value from buying Ted Baker given its patchy past and strategic mishaps, so it’s not surprising that the sale process isn’t going smoothly.
“Anyone buying a troubled business will want a knock-out price to compensate for the extra risks involved, so perhaps conversations haven’t been going well in terms of a price that both the suitor and target can agree on.”