There are reports that waste management business Bingo Industries Ltd (ASX: BIN) has received a takeover offer, the Bingo share price could soar in reaction.
Bingo is a fully-integrated recycling and resource management company, with a workforce of over 1,000 people and a fleet of around 330 trucks across New South Wales and Victoria.
What’s going on?
According to reporting by the Australian Financial Review, the private equity outfit CPE Capital is trying to buy Bingo for $2.5 billion.
The AFR says Bingo has allowed CPE Capital and its consortium partners to have a look at the numbers, which is part of the due diligence and this will help create a more concrete offer.
The bid is apparently more than $3 a share according to the AFR’s sources. Doing some rough calculations, a $2.5 billion bid could mean the offer is quite a bit more than $3, considering the Bingo market capitalisation was $1.77 billion before the market learned of the bid. The AFR said the non-binding proposal includes debt, with the company having $308 million of net bank debt at the end of FY20.
Would this be a good deal?
Well, it’s probably far too early in the process to be certain that a formal offer will go ahead. But it seems like a solid offer.
In FY20, Bingo made underlying revenue of $486.7 million (which was growth of 21%), underlying EBITDA (EBITDA explained) of $152.1 million (up 40.8%) and statutory net profit after tax (NPAT) nearly tripled to $66 million. These underlying figures primarily exclude the $22.4 million gain on the sale of the Banksmeadow facility.
In a trading update, Bingo said that there were robust volumes in the post-collections business in the first quarter of FY21, though prices remained below COVID-19 levels, but there was an uplift in prices in September 2020.
Based on the fact that Bingo is trading at approximately 40 times the underlying net profit from FY20, I think a bid around $2.5 billion is a pretty good outcome for Bingo shareholders.
The Bingo share price has barely been above $3 since it listed a few years ago. If I were a shareholder, I’d be happy to sell my shares after an official announcement. There is a chance of a counter bid though.
If I sold my Bingo shares I’d want to put it into a long term growth business such as Magellan Financial Group Ltd (ASX: MFG) or Pushpay Holdings Ltd (ASX: PPH).
