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Shanks Walks Away from Carlyle Buyout Talks

LONDON (Reuters) – British waste management company Shanks (SKS.L) ended talks with buyout firm Carlyle Group after rejecting a reduced 120 pence per share indicative cash offer, sending its shares down 14.5 percent.

Shanks said it received a final offer from Carlyle on Monday valuing the business at 476 million pounds ($713 million), lower than the 536 million, or 135 pence per share, which the private equity firm offered in December.

“Carlyle has failed to offer a price which in the view of the board properly reflects the value of the group,” Shanks chairman Adrian Auer said, adding further talks would not be in the interests of shareholders.

At the time of the 135 pence approach, key shareholders told Reuters they were looking at an offer closer to 150 pence. Since then, Shanks has issued a profit warning, saying in February its full-year results would be hit by the impact of “exceptionally adverse” weather conditions.

Carlyle would not comment on reasons for lowering its offer.

Shanks shares were down 14.5 percent at 102.9 pence by 1230 GMT, above an earlier low of 95.9 pence.

“There will be some pondering today over what led Carlyle Group to make a final offer 15 pence per share below its initial indicative offer,” said FinnCap analyst Charles Pick.

“This said, Shanks remains the only decent sized UK quoted waste management play and consolidation has been very much a feature of the sector so bid speculation could reoccur.”

Analysts at JP Morgan said the announcement “will clearly disappoint investors” but noted the shares were already factoring in the risk of a lower bid or no bid at all.

Shanks said it had “engaged constructively with Carlyle and their advisers, who were granted extensive access both to information on the group and its key personnel across Europe”.

Shanks said it remained committed to a strategy of focusing on its three growth areas of recycling, organic processing and British private finance initiatives.

 

“Whilst trading conditions for the waste industry across Europe remain challenging reflecting the weak macro-economic environment, the board is very confident in the group’s longer-term prospects,” the company said.

By Matt Scuffham

(Additonal reporting by Myles Neligan and Simon Meads; Editing by James Davey and Dan Lalor) ($1 = 0.6672 pound)