CPE Capital and Macquarie Infrastructure and Real Assets may have grand plans to expand the Bingo Industries business with the acquisition of assets owned by Suez and Veolia, according to industry analysts.
Bingo Industries confirmed on Tuesday that it had received a $3.50-a-share bid from CPE Capital and MIRA, valuing the company at close to $2.3bn.
Some believe the business could provide a platform from which MIRA and CPE Capital could make more acquisitions in the sector.
Waste management company Veolia is in the process of attempting a $US13bn ($16.8bn) takeover bid for French rival Suez.
Both are global industry giants that have a presence in Australia, and Veolia has said publicly before that in buying Suez it would be required to sell assets in Australia due to competition concerns. The assets could appeal to Bingo’s new owners.
Bingo’s Australian rival Cleanaway has already indicated an interest in buying assets in the wash-up from a Veolia-Suez transaction.
As part of the indicative bid, Bingo has allowed the CPE Capital consortium to conduct due diligence on the business, but some institutional investors insist that the consortium needs to pay more than $4 a share to win the company.
Bingo shares closed at $3.30 on Tuesday, which may suggest that investors are sceptical that any deal will happen.
The offer was a 28 per cent premium to the last close, below the 30 per cent premium typically offered in takeovers, and about 10 times its earnings before interest, tax, depreciation and amortisation.
One institutional investor said an offer of around $4.20 a share would be worth considering.
They said the company’s share price fell to as low as $1.20 amid the COVID-19 pandemic and shareholders needed to be adequately compensated for that risk.
Bingo is heavily weighted towards the construction industry, given that it makes money from waste recycling and waste disposal contracts on construction and infrastructure jobs, with its large skip bids used for building projects.
Bingo generates 72 per cent of its earnings from its landfill in Sydney’s Eastern Creek and recycling in Melbourne and Sydney and its share price fell further last year than that of Cleanaway, which is considered more stable with government contracts.
Shareholders now believe that Bingo is positioned for a major earnings lift as the economy recovers and capital investment at its facilities has paid off.
Details of an alternative scrip bid that is likely to be offered are yet to be made known.
The company was listed by the family of chief executive Daniel Tartak in 2017. He currently holds a 19.8 per cent stake.
After Bingo bought Dial a Dump in 2019 for $577m, Dial a Dump owner Ian Malouf became a shareholder. He currently owns about 12 per cent.
It will be interesting to see if both are able to vote on any scheme-of-arrangement deal that emerges or if they will not be taking part due to conflicts of interest.
One of the draw cards for private equity buying Bingo is that the company owns property in western Sydney. According to its annual report, Bingo has property, plants and equipment worth $705,667m.
UBS is working to assist Bingo on the bid.
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