Report: Consortium bids £520m for troubled Biffa

Private equity firm Clearbrook Capital is reported to be part of a consortium attempting to buy the UK waste management firm, which was acquired by Montagu Private Equity and Global Infrastructure Partners for £1.7bn four years ago.

Biffa, the UK’s second-largest waste management company, has received a “highly conditional” £520 million (€659 million; $814 million) cash offer according to a report in the Financial Times.

The report cites the Chinook consortium as the bidder, comprising UK recycling specialist Chinook Urban Mining and UK private equity firm Clearbrook Capital Partners. Other reports have indicated investment bank JP Morgan is also involved.

Biffa was acquired by New York-based infrastructure fund manager Global Infrastructure Partners (GIP), together with London-based European private equity firm Montagu Private Equity, for £1.7 billion in 2008.

Since then the business has struggled with declining waste production due to the recession, a reported £1 billion debt pile and tough banking covenants. It has also been accused of not moving quickly enough to reduce its exposure to industrial waste and expand its recycling business. Although Biffa acquired recycling specialist Greenstar for £135 million in June 2010, industrial waste still accounts for around 80 percent of its earnings.

The FT report says that the proposed deal would “likely wipe out” £260 million of mezzanine debt with senior lenders taking a haircut. It says the lenders have formed a steering committee to consider the approach.

In March this year, it was reported that GIP and Montagu were looking at the possibility of a cut-price offer for Biffa in exchange for a stake in any “future merger synergies”. Biffa had commenced a strategic review, advised by Goldman Sachs, two months prior. 

Biffa has the largest industrial and commercial waste collection network in the UK with 1,450 collection vehicles serving over 70,000 customers from 128 locations. It reported £850 million in revenues and £150 million in earnings before interest, tax, depreciation, amortisation and provisions in the year to March 2012.

At the end of last month GIP had raised $7.5 billion for its second fund, which has a hard cap of more than $8 billion. The firm's first fund closed on $5.64 billion in 2008.