Waste Management group Biffa (BIFF) announced the acquisition of Simply Waste on Friday for an upfront debt and cash free consideration of £35 million, funded from existing debt facilities. The shares gained 3% to 234.5p.
STRATEGIC FIT
The acquisition is in line with Biffa’s strategy to consolidate a heavily fragmented market, extract synergies, increase route densities and reduce carbon emissions. Today’s announcement ties in with one of the three acquisitions the company referred to its July trading statement and follows on from last month’s purchase of Ward’s compacting business.
Simply Waste is a leading industrial and commercial waste collection business operating in west London, Oxfordshire and Bristol which ‘aligns well’ with Biffa’s existing collection network and will result in ‘an enhanced customer proposition and a lower-carbon, more efficient collection network.’
The company claims the purchase will be earnings enhancing 'from the outset' and should deliver synergies from operational benefits.
According to broker Investec, assuming synergies are realised, the EBITDA (earnings before interest, taxes, depreciation and amortisation) contribution in fiscal 2022 is expected to be around £7 million.
This implies an acquisition multiple of five to six times enterprise value (EV) to EBITDA, below the 6.6 times valuation for Biffa based on Investec’s sum of the parts valuation. EV is the total value of the business including all debts and cash. An earn-out of up to £5 million will become payable depending on future performance to 31 March 2021.
Chief executive Michael Topham commented, ‘we are delighted to welcome the Simply Waste team and their customers to Biffa. Simply Waste has an excellent reputation, complementing Biffa's existing footprint in the south of England, and I am confident that this acquisition will enhance the strength of our service offering in the region for our combined customers.’
