Shanks Group surges on £536m Carlyle bid

Despite a significant bid premium, the listed waste management business has said a better offer is needed.

London-listed waste management business Shanks Group has seen its shares climb 36 percent following a takeover bid from US private equity firm The Carlyle Group.

Shanks said it had received a “preliminary and unsolicited” offer of 135 pence per share from a private equity firm, confirmed by market sources as being Carlyle. The offer would value Shanks at around £536 million (€593 million; $884 million).

If Carlyle's bid is successful, the deal would become the largest public-to-private deal in Europe this year. Several larger transactions have completed in the US, such as the $5.2 billion take-private of IMS Health by TPG and CPPIB, according to data provider Dealogic.

Before the markets opened this morning, Shanks’ shares were trading at around 90 pence.  Carlyle’s offer was priced at a 50 percent premium. Since then shares have climbed to 127 pence, a jump of around 36 percent.

Shanks’ board held discussions with its two largest shareholders and has subsequently solicited higher bids in the region of 150 pence or more, which would “deliver an appropriate value to shareholders”, the firm said in a statement. Such a bid would value Shanks at nearly £600 million.

Shanks’management gave a cautious outlook on the market when it released its interim results in November. Revenue and EBITDA were both down 3 percent and 5 percent respectively. The firm, which operates in the UK, the Netherlands, Belgium and Canada, strengthened its balance sheet earlier in the year with a £66.7 million rights issue.

“Until the recovery materialises we will continue to focus on rigorous management of costs and cash whilst investing selectively in our growth areas of recycling, organic processing and UK PFI,” said chief executive Tom Drury in a statement in November.

Carlyle declined to comment.