LONDON (Reuters) – British private equity firm Terra Firma and Australian rival Pacific Equity Partners (PEP) are vying to acquire the landfill-gas unit of Britain’s Biffa, people familiar with the matter said.
Terra Firma, Guy Hands’s buyout firm, already owns Britain’s biggest waste-to-energy firm, Infinis, while PEP owns a majority in Energy Developments Ltd (EDL) (ENE.AX), Australia’s biggest such firm and already a major operator in Britain.
Both are preparing binding bids for an end-May deadline but there remains a risk that neither will offer enough to convince current owners Montagu Private Equity and Global Infrastructure Partners (GIP) to sell, the people said.
Other takeovers, along with debt levels in the sector, could point to a valuation of little more than six times the Biffa unit’s roughly 35 million pounds in earnings before interest, tax, depreciation and amortisation (EBITDA), one of the people said. That would equate to offers of some 210 million pounds ($303 million).
The business turns methane gas emitted from rotting rubbish at dozens of landfill sites across Britain into a power source that can last for up to three decades. But bidders are grappling with static or declining earnings and a value that depends partly on future fluctuations in power prices.
Rival investors 3i Infrastructure (3IN.L) and CVC Capital Partners [CVC.UL] had dropped plans to bid for the unit, some of the people added.
It was not clear if strategic rival Pennon Group Plc (PNN.L), owner of Viridor, is in the auction. A sale to Viridor would compel Biffa to open up many of its sites to a direct rival in its main waste-management business.
Montagu, Pennon and Terra Firma declined to comment. GIP was not immediately available, while EDL did not immediately return a request for comment. (Reporting by Quentin Webb; Additional reporting by Victoria Bryan in London and Greg Roumeliotis in Amsterdam; Editing by David Holmes) ($1=.6935 Pound)