Terra Firma clinches second deal

The European private equity firm has acquired the British waste management business of Shanks, the European waste management company for £227.5m from under the noses of rival bidder, Pennon, a UK-based water supplier.

Terra Firma Capital Partners, the European private equity firm founded by UK financier Guy Hands, has had a £227.5 million (€340.8 million; $412.1 million) offer accepted for the British waste management business of Shanks, the European waste management company.

Terra Firma was believed to be in second place in the bidding for Shanks, behind front-runner Pennon, before it trumped the West country based water supplier with a late, higher bid. Pennon was reported to have offered around £200 million for the business.

The acquisition follows a separate £1 billion approach for Pennon itself earlier in the month by Terra Firma, which was rejected by the water supplier.

The deal is Terra Firma’s second investment since its inception, having acquired landfill operator Waste Recycling Group in July 2003. A source close to the firm said that both businesses would be looked at closely before deciding whether a merger would be appropriate.

Commenting on the transaction, Hands said in a statement: “We are delighted to have the opportunity to expand our presence in the sector. The combination of Shanks’ UK landfills with Waste Recycling Group will bring added operational and strategic focus to the business.”

Terra Firma closed its debut fund in March this year on €2 billion, the largest first time private equity fund raised by a European manager. Asked to comment about recent press reports that the firm was having trouble completing deals, a spokesperson for the firm said the fund was set up not to be a serial acquirer of businesses, but to make two to three investments per year, targeting assets of around €1 billion in enterprise value.

Terra Firma is currently one of two preferred bidders, alongside Fortress Investment Group, for an 82,000-home German social housing project. The final bidding process for Gagfah Gemeinuetzige AG, which could be worth as much as €3 billion according to sources, is likely to be decided within the next month.

Acquiring Gagfah would make Hands Germany’s largest private residential property owner. He already controls the 79,000 German homes owned by Deutsche Annington Immobilien, which was acquired when Hands was investing on behalf of his former employer Nomura International.