Biffa buys SWRNewstar for £26m in cash

Integrated waste management group Biffa has bought Specialist Waste Recycling Limited (SWRNewstar), from a consortium of investors including Angus MacDonald for around £25.8n in ash.

The deal will be funded from Biffa's existing cash and debt facilities.

For the year ended 31 December 2018, SWRNewstar generated revenues of £40.1m and underlying operating profit of £3.4m.

SWRNewstar's business model is to provide waste and recycling solutions to its customers on a national basis, with the physical delivery of the service provided by a network of sub-contractors.

Biffa is an established sub-contractor to SWRNewstar, servicing around 11% of its customers' requirements.It said the deal provides it with the opportunity to increase the proportion of work serviced by its' collection and processing network, as well as expanding routes to market.

Chief executive officer Michael Topham said: "The acquisition of SWRNewstar represents a compelling opportunity for Biffa and provides further evidence of our ability to identify and execute cash flow enhancing and earnings accretive acquisitions.

"Bringing together SWRNewstar with Biffa's leading industrial & commercial business will strengthen our offering while enabling us to profitably leverage our national network. We welcome the staff and customers of SWRNewstar to Biffa."

SWRNewstar was formed through the merger of the waste brokerage businesses Specialist Waste Recycling and Buckingham-based New Star Environmental.

Numis said: "The pre-synergies LTM multiple of 7.4x EBITDA (circa 5x post-synergies, we estimate) represents an attractive multiple for a growing, capital light business that expands Biffa's routes to market in the industrial and commercial space.

"We increase our forecasts by 4-7% in FY20-21E. Our price target increases to 305p (previously 290p) and we reiterate our buy recommendation."

At 1440 MT, the shares were down 0.2% to 204.50p.