LONDON: Biffa plc (LON: BIFF) has entered into an agreement to acquire the collections business and certain recycling assets from Viridor Waste Management Limited for a cash consideration of £126 million.

This acquisition expands Biffa’s collections business and recycling capabilities while solidifying its leading position in UK sustainable waste management. Completion is expected no earlier than August, following the necessary separation steps and subject to Competition and Markets Authority (CMA) clearance.

Michael Topham, Chief Executive of Biffa, commented: “The acquisition of Viridor’s Collections business, and certain Recycling assets, is a compelling opportunity for Biffa. The addition of Viridor’s £85m collections revenues builds on the Group’s strong track record as the leading market consolidator in the highly fragmented I&C collections market. In addition, the acquired recycling and treatment assets broadens our coverage and control of materials, strengthening Biffa’s position as one of the largest recyclers of post-consumer materials in UK.

“When combined with the other investments we have made over the past year across waste reduction, recycling and energy recovery, we have positioned the Group as a leading enabler of the UK circular economy, ready to tackle the UK’s waste challenge. We look forward to welcoming our new colleagues from Viridor to Biffa in due course.”

Biffa has a clear strategy for growth, focused on strengthening its circular economy offering in line with its purpose to change the way people think about waste. In recent years the Group has focused on three specific investment areas: growing Biffa’s leading I&C Collections platform; expanding its award-winning plastics recycling business, Biffa Polymers; and investing in Energy-from-Waste (EfW) infrastructure.

The Group’s strategy was recently strengthened by the acquisition of Company Shop Group which broadened Biffa’s positioning across the waste hierarchy, expanding its offering with commercial surplus redistribution and improving its capability to support customers’ waste reduction and recycling targets.

The acquisition of Viridor’s Collections business and certain Recycling assets represents a highly compelling strategic opportunity fully aligned to these growth ambitions. It builds on the Group’s strong track record as the leading consolidator in the highly fragmented UK I&C collections market which has seen Biffa successfully build a market leading platform of scale, acquiring and successfully integrating 45 businesses since 2013, delivering significant synergy benefits.

Biffa’s position will be strengthened as one of the largest recyclers of post-consumer materials in the UK, with the acquisition diversifying the R&E business, with 8 additional recycling assets.

The Group’s long-term control of plastics feedstock for its Polymers business will also be increased through the acquisition with c. 22,000 tonnes of annual long-term supply. The Group has pledged to quadruple its plastics recycling capacity by 2030 and has committed over £55m of investment in this area in the last two years. The Group is on track to have increased its annual plastics recycling capacity from 60,000 tonnes in FY19 to 155,000 tonnes by the end of FY22.

Biffa’s Collections division comprises the Group’s I&C and Municipal businesses, providing sustainable waste collections, recycling and related services to industrial, commercial, public sector and local authority customers. The business generated net revenues of £871m in FY20 (prior to the Covid-19 pandemic).

Inorganic growth has been core to Biffa’s growth strategy in its Collections division, and the Group has a strong track record as a market consolidator in the highly fragmented I&C collections market. The I&C business has grown from £350m net revenues in 2014 to £604m in FY20, creating a Collections platform of significant nationwide scale, enhancing customer service and improving operational efficiency whilst growing margins. M&A is also fundamental to the Group’s sustainability plans, as we amalgamate additional volumes into existing waste collection routes and thereby reduce congestion, carbon intensity and improve air quality as a result of fewer collections vehicles on the roads.

Through the acquisition, the Group will acquire Viridor’s nationwide I&C fleet of 270 vehicles along with 15 depots across the UK, servicing 21,000 customers, generating £85m of revenue in FY20 (March year-end) and completing over 3m lifts each year. The business will be integrated into Biffa’s existing I&C platform across the UK. The acquisition will add two household waste recycling centre contracts (‘HWRC’) to the Municipal business, these contracts generated £11m of revenue in FY20.

The consideration is to be funded from £150m of new seven and ten year private placement facilities from MetLife Investment Management and Pricoa Private Capital with an average cost of funds of 2.73%. Immediately following completion, pre IFRS16 Net debt:EBITDA (as calculated on a bank covenant basis) will rise to c. 2.6-2.7x, remaining well within the Group’s covenant headroom before reducing back to c. 2x EBITDA within 12 to 18 months of completion.

Completion is expected no earlier than August, following completion of separation steps and subject to CMA clearance.

Biffa PLC (LON: BIFF)

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20 May, 4:35 pm GMT+1 · Disclaimer

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