The board told investors yesterday it has received “a highly preliminary and unsolicited approach from a private equity group” regarding a potential cash offer at 135p a share, a near 50% premium to Friday’s closing price.
Although Shanks did not name the bidder, it is understood Carlyle, which has pro-perty and business interests in Scotland, is behind the move.
Shanks’s shares soared 36.9p or 41% yesterday to 127p. They hit a year low of 36.15p in March.
The group said a cash offer of 150p or more, valuing the company at £594m, “would deliver an appropriate value to shareholders” and it would make a further announcement.
Shanks has its roots in Shanks & McEwan, founded in Scotland at the end of the nineteenth century when it was behind the building of the country’s railway network.
Although it moved its head office to Buckinghamshire in the mid-1990s a few years after listing on the stock exchange, its registered office remains in Glasgow.
It has long since switched its focus from construction and civil engineering to waste management and recycling and is expanding its green energy facilities. Close to 90% of its revenues are now earned in Holland and Belgium.
Shanks still has numerous waste management operations north of the border stretching from Aberdeen to Argyll. It is currently pursuing plans to redevelop the Blochairn site on the edge of Glasgow to provide additional recycling facilities.
Shanks received permission in October to open a £8m centre in Cumbernauld where food leftovers will be used to generate “green” electricity capable of powering 3000 homes.
The joint venture with Scottish specialist Energen Biogas will employ the same anaerobic digestion technology Shanks is using to generate power in Holland and Canada. It is expected to start work next summer. Asked if the takeover approach could affect future plans for the plant, a spokesman for the company said: “The board are quite clear.
“They are delivering on their priorities. That includes things like the Cumbernauld anaerobic digestion plant.
“If it was fast-forward and there was approach and an offer which was successful, we cannot say (what the situation would be).
“Stood here today, the reason the market likes Shanks is because they have things like Cumbernauld.
“But we cannot say what the future holds.
For the time being, it is business as usual.”
He said the next move is down to the potential bidder.
“We have said our piece and the ball is pretty much in the court of the private equity group really.
“If needs be the company will make a further statement as appropriate but there is no timetable.
“The important thing here is this is a company that has spent quite a lot of time and effort in making sure it is in a strong position.
“But as a listed company the board as an obligation to their shareholders to act in their best interest.
“If that best interest is in what becomes an offer, they have to consider that.”
Under chief executive Tom Drury, a former United Utilities director appointed in 2007, Shanks has cut debt through a rights issue and disposals. It has also increased its focus on recycling, organic waste treatment, and the private finance contracts with the public sector.
But the economic downturn has weighed down on the sector.
In the year to March, Shanks made pre-tax profit of £34m on revenues of £697m. This compares to £564m of revenue and £41m of pre-tax profit the previous year.
Other similar companies, such as Cory and Biffa have already been taken over by private equity firms.
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