7 June 2022
Biffa plc
Announcement regarding possible offer
The Board of Biffa plc (“Biffa” or the “Company”) announces that it has received a series of unsolicited and indicative proposals from affiliates of Energy Capital Partners, LLC (“ECP”) on behalf of funds and other investment vehicles managed and/or advised by ECP and its affiliates to acquire the entire issued, and to be issued, share capital of the Company.
Following a period of discussion and negotiation, ECP's proposal is in respect of a possible offer at a price of 445 pence per Biffa share in cash (the “Proposal”).
The Proposal is subject to the satisfaction or waiver of a number of customary pre-conditions, including satisfactory completion of due diligence and the finalisation and documentation of financing for the transaction.
The Board of Biffa has carefully evaluated the Proposal together with its financial adviser, Rothschild & Co, with regard to the fundamental value of Biffa as well as the likely value to be created by the continued delivery of its strategy. This evaluation also considered the various risks the Company faces including the current status of discussions between HMRC and Biffa regarding a landfill tax enquiry which is described in more detail below.
The Board of Biffa has concluded that should a firm offer be made on the same financial terms as the Proposal it would be minded to recommend it to Biffa shareholders, subject to the agreement of other customary terms and conditions. Accordingly, on the basis of the Proposal, the Board has granted ECP access to due diligence materials.
Current trading
Biffa continues to trade well, with underlying performance being in line with the Board's expectations. Volumes have remained at expected levels and Biffa continues to mitigate inflationary headwinds. Good progress continues to be made in delivering key strategic priorities including the integration of recent acquisitions, ramping up production of food grade recycled plastics, and developing energy from waste projects.
In light of the Proposal, the full year results which had been scheduled for announcement on 16 June 2022 will now be announced on 28 June 2022.
Landfill tax enquiry
As part of concerns HMRC has regarding potential misclassification of waste across the industry, Biffa is currently the subject of an enquiry by HMRC regarding certain aspects of its landfill tax compliance (the “Enquiry”). Biffa strongly refutes HMRC's concerns. The Company is fully co-operating with HMRC in relation to the Enquiry and is receiving advice from Ernst & Young. To date, no formal claim for tax has been received from HMRC, there is no certainty that HMRC will bring a claim and it is likely that it will be some time before the Enquiry reaches a conclusion.
In Biffa's view, based on advice received to date, there are a range of possible outcomes to the Enquiry, and it is not possible at this time to ascertain the quantum of any potential liability with any certainty or precision. The potential liability could range from approximately £170,000 (based on the liability declared by Biffa to HMRC following an extensive review with Ernst & Young) up to a possible maximum of approximately £153 million (being the total amount of protective assessments issued by HMRC to Biffa for the period from March 2016 to March 2020) plus penalties and interest. The protective assessments have been issued before the conclusion of the Enquiry to ensure that any claim for payment of landfill tax that may be made by HMRC is not time-barred. The protective assessments are not an indication of what any liability may actually be, nor is their existence an indication that a claim will be brought.
Important Takeover Code notes
In accordance with Rule 2.6(a) of the Code, ECP is required, by not later than 5.00 p.m. on 5 July 2022, either to announce a firm intention to make an offer for the Company in accordance with Rule 2.7 of the Code or to announce that it does not intend to make an offer for the Company, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline can be extended with the consent of the Panel on Takeovers and Mergers in accordance with Rule 2.6(c) of the Code.
Shareholders should note there is no certainty any offer will be made even if the pre-conditions referred to above are satisfied or waived.
In accordance with Rule 2.5 of the Code, ECP reserves the right to introduce alternative forms of consideration. ECP also reserves the right to make an offer on less favourable terms than those described in this announcement:
- a) to the extent that Biffa declares, makes or pays any dividend or distribution or other payment to its shareholders (in which case ECP reserves the right to make an equivalent reduction to the proposed price); and/or
- b) with the agreement of the Board of Biffa; and/or
- c) following the announcement by Biffa of a Rule 9 waiver pursuant to the Code.
For the purposes of Note 3 on Rule 2.5 of the Code, this announcement has been made with the consent of ECP.
A further announcement will be made when appropriate.