Waste management group Biffa is target of a £520m offer from consortium including Chinook Urban Mining and JP Morgan
A consortium has made a £520m cash offer for Biffa, the debt-laden waste management group that has contracts with numerous local councils.
The Guardian understands that the group's private equity owners have received a bid from a consortium of Chinook Urban Mining, the London-based recycling specialist, private equity investor Clearbrook Capital and US bank JP Morgan.
Biffa is under pressure to pay back £1.1bn of loans and has contracts with local authorities including Portsmouth city council, East Hampshire district and Winchester city council, and the Isle of Anglesey county council.
The offer was submitted last week to PricewaterhouseCoopers (PwC), the advisers to the 76 banks and financial institutions that lent funds to Biffa's current owners, Montagu Private Equity and Global Infrastructure Partners. The fate of Britain's second largest waste management group once again raises the role of private equity funds acquiring assets by buying the loans of troubled companies at a discount and burdening them with debt. Other distressed debt funds are also understood to be circling Biffa, but are not yet thought to have submitted a bid.
Biffa has been struggling with its debts since the private equity firms acquired the company for £1.2bn in 2008 and its owners have written off their investment in the company.
The Chinook-Clearbrook-JP Morgan consortium is understood to believe that they can restore Biffa to profitability by implementing a renewable energy plan that will convert waste into energy.
None of the bidders, the owners, or the lending banks would comment when contacted by the Guardian, although the bid is understood to have been presented by PwC last Friday at a meeting with Biffa's senior management and the lenders to discuss its debt refinancing strategy. The lenders have formed a steering committee comprising HSBC, GE Capital, Dexia and Prudential M&G to consider the approach.
Biffa is not facing an imminent liquidity crisis but its performance has been under pressure on several fronts, notably government changes to landfill tax. The company provides collection, treatment, recycling and disposal services across the municipal and commercial sectors.
The group, which was a public company as recently as 2008, was founded 100 years ago by the Biffa family as a haulage business largely dedicated to the collection of ashes, dust and clinker from coal-fired power stations in the London area, but the business has developed over the past century and in the 1960s moved into the industrial waste market.
In the year to April 2011, the group made a pre-tax loss of £127.5m on revenues of £775.1m.
"This is a serious offer and the only firm bid on the table, but some of the bankers appear to be blocking it and it is difficult to get a consensus among so many banks," said a source close to the negotiations. A source close to Montagu insisted that the bid was being considered.