Shanks Group snubs Carlyle Group’s final 120p approach

Waste manager Shanks Group (LSE: SKS) has ended its discussions with its private equity suitor, the Carlyle Group, saying the international private equity group’s final price indication of 120p per share does not properly reflect Shank’s value.

Carlyle’s final price indication was in line with yesterday’s closing price of 120.4p, but 15p per share lower than December’s preliminary approach of 135p per share. Following this morning’s announcement Shanks’ share price slumped on the London Stock Exchange to trade at a low of 95.9p per share before recovering somewhat to trade at 101.4p in late afternoon deals, down almost 16% on the day.

"The board's response to the approach from Carlyle has always been about price”, Shanks chairman Adrian Auer commented. “Although the timing of their approach was not of our choosing, we have engaged fully and professionally, but Carlyle has failed to offer a price which (in the view of the board) properly reflects the value of the group”. 

Following a meeting between the respective parties yesterday, Shanks concluded that it is unwilling to recommend the 120p offer and that further discussions with Carlyle are not in the interests of Shanks shareholders.

Shanks initially reported Carlyle’s approach in December. Commenting on the ‘highly preliminary’ offer, Shanks had said a cash offer in excess of 150p per share would deliver an ‘appropriate value’ to shareholders. At the time, Shanks reported that it held discussions with its two largest shareholders in reference to the offer and the board’s 150p asking price. And both parties were in support of the board’s valuation, Legal and General (LSE: LGEN) and Schroders (LSE: SDR) hold a combined 32% stake in the company, each holding 16%.

Shanks said it remains committed to a focused strategy around its three principal growth areas of recycling, organic processing and UK PFI. “Shanks is a well-managed group with good strategic positioning in the evolving European waste markets and the board is confident that the group can deliver attractive growth in shareholder value over the medium term", Auer added.

The company noted that the announcement had not been made with the agreement of Carlyle, and if appropriate either Carlyle or Shanks may make further announcements regarding the proposals. Accordingly Shanks said that for the purposes of the Takeover Code, the company remains in an offer period.

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