Bingo shares soared 20.4% to close at $3.30 on Tuesday. The cash prop is at a 28% premium to Monday’s closing price of $2.74.
The takeover proposal was made at a high multiple of almost 20 times enterprise value/EBITDA on 2020-21 earnings estimates, double those of the last two major acquisitions in the sector.
Goldman Sachs analyst Michael Peet said Bingo paid a multiple of 9.6 times when it acquired Dial-A-Dump in 2018 from Mr Malouf, while the pre-synergy acquisition of Cleanaway from ToxFree in 2017 was a multiple of 10 times.
Bingo said in a statement to the ASX that the takeover proposal also involves an alternative lower price structure involving cash and unlisted certificates, which has the potential to increase provided certain revenue hurdles are met. satisfied following a change of ownership.
Bingo called the proposal “highly conditional”, non-binding and indicative. He said the alternative cash and lower-priced certificates proposal had minimum and maximum acceptance conditions and would need to gain the acceptance of chief executive and major shareholder Daniel Tartak and Mr. Malouf to succeed.
Mr. Tartak owns 19.8% of the company and Mr. Malouf around 12%. Other members of the Tartak family own an additional 2% of the business.
Bingo runs a fleet of 300 waste collection trucks with bright orange branding in Sydney and Melbourne. It underwent a major expansion when it acquired rival firm Dial-A-Dump in 2018 for $578 million from entrepreneur Mr. Malouf to add extra muscle to take on heavyweights such as Cleanaway and multinationals. Veolia and Suez.
Morgans equity adviser Lisa Shand said the CPE consortium “may want to use Bingo as a platform to bid on assets that may arise from the proposed takeover of Suez by Veolia”, in order to ease the problems of competition.
Veolia has a 30% stake in Suez and made an offer last year for its global rival. This offer is resisted.
Bingo’s proposed takeover was first revealed online on Monday by The Australian Financial Review Street Talk column.
The independent board committee set up by Bingo to review the proposal includes directors Elizabeth Crouch, Barry Buffier and Maria Atkinson.
“The proposal is being reviewed by an independent committee of Bingo’s board of directors and discussions and due diligence with the consortium are ongoing,” Bingo said.
The company has warned that it will only enter into a transaction that provides appropriate value to all shareholders.
Bingo shareholders have had a volatile run since the company listed in May 2017 with an issue price of $1.80. The company left investors stunned in February 2019 when it cut its earnings forecast by up to 20%. The stock price plunged to just $1.17 after the shock downgrade, after hitting $3.17 in early October 2018.
Bingo has been run by Daniel Tartak since June 2015. In 2005, his father Tony Tartak spent less than $1 million buying a four-truck dump business that was the cornerstone of Bingo’s original business. It has grown steadily under 12 years of family ownership.
Macquarie’s infrastructure investment arm, MIRA, has more than US$130 billion ($169 billion) in assets under management. Its Australian investments include NSW electricity distributor Endeavor Energy and former government land titles offices in South Australia and Western Australia.
MIRA’s investments also include waste management companies in North America and Europe.
The takeover proposal comes as federal and state governments attempt to boost recycling rates in Australia and embark on an infrastructure spending spree to boost the pandemic-battered economy.
In September 2019, analysts believed CPE Capital could be planning a much larger foray into the waste management sector, which is dominated by Veolia, Suez and ASX-listed Cleanaway, after acquiring the management facility. waste from Banksmeadow in the suburbs of Sydney. She has been running this business for 15 months.
Private equity firms had traditionally avoided the waste management and recycling industry. CPE, then known as CHAMP, sold Accolade Wines for $1 billion in 2018. Accolade owns brands including Hardys, Grant Burge and Petaluma.