In June we saw the much-anticipated announcement of the sale of Cory Riverside Energy by SVPGlobal and the other shareholders for a colossal £1.5bn. It has been a text-book example by the exiting shareholders on how to maximise value – ultimately recognising that the individual parts of the company were worth far more than the whole.
The acquiring consortium was led by Dalmore Capital, a London-based infrastructure investor which manages £3.8bn of funds, and included Fiera Infrastructure, Semperian and Swiss Life. This is the first energy-from-waste (EfW) investment for any of them.
It is worth looking back at how the process evolved to deliver such a great outcome for the shareholders.
The aborted process (2015)
In 2007, Eiser Infrastructure, Santander and Finpro acquired Cory for £588m from private equity firm Montagu, in a highly leveraged buyout. In early 2015, the heavily indebted Viking, which included Cory Environmental and the Riverside EfW plant, was put up for sale to realise an exit for these shareholders.
Unfortunately, the target equity value of around £500m never materialised and it became clear that the other divisions within Cory – landfill, municipal and brokerage – were a drag on the overall value of the Riverside ‘jewel in the crown’. Riverside is one of the UK’s largest EfW facilities, has an R1 efficiency certification and is considered to be best in class. It also delivered almost 70% of the group’s EBITDA.
Offers for the business peaked at around 7.5x EBITDA, much lower than the Dutch AVR acquisition, which was sold to Cheung Kong Group for 9.1x EBITDA. German company EEW was also known to be in process and expecting a valuation around 10x.
With the sale not happening, the debt holders SVP, EQT Credit and Commerzbank forced a debt-for-equity swap and assumed total control from Eiser and the others. This reduced Cory’s debt from £790m to £410m and maturities were pushed back to December 2019, effectively giving the business a three-year window in which to execute a more successful exit.
The non-core sell off (2016 and 2017)
Nick Pollard joined the team as chief executive from Balfour Beatty at the end of 2015 and set about selling the non-Riverside assets.
During 12 months, Cory sold three non-core divisions. The municipal business based in the south-west was sold to Biffa in June 2016. A month later, the brokerage business was acquired by Bregal Capital-backed Reconomy and, in January 2017, the landfill operation, which included 14 landfill sites, was sold to Armour, a Bermudan-based insurance and reinsurance provider.
Importantly, this decoupled any potential landfill liabilities from a future sale of Riverside, the level of which attracted much debate in 2015.
With the non-core gone, Cory then rebranded as Cory Riverside Energy and revealed plans to build a second large EfW facility (650,000 tonnes a year) adjacent to the existing site in Belvedere, Kent, and provide prospective buyers significant expansion opportunity. It was expected that this new £500m plant would be factored into the buying price.
The perfect exit (2018)
In October 2017, the shareholders (60% now owned by SVP) appointed JPMorgan to sell the business. The process was competitive, attracting a wide range of investors – from strategic players such as Beijing Enterprises and China Everbright to institutional investors including Amber Infrastructure, Arcus Infrastructure, Equitix and Dalmore Capital.
But Chinese interest waned and the infrastructure funds were now making all the running.
It was confirmed in June that Dalmore and its consortium was the successful bidder, paying around £1.5bn of enterprise value. By any measure, the shareholders can feel they have executed a patient and perfectly managed process, which has ultimately delivered a great outcome.
Contrasting the metrics of this deal for Riverside against AVR and EEW, illustrated by the chart (above), underscores the value that the new investors have placed on this asset: highly strategic location in a global metropolitan city, favourable market dynamics, a high-quality plant and operations, and the opportunity to almost double capacity in the next five years.
While it would be easy to read this deal across to the wider EfW market, our assessment is that the sale of Cory Riverside was unique and not easily applicable to wider market valuations – even given the substantial market opportunity for EfW to address the continuing, and mountainous, residual waste capacity gap in the UK.
Mark Wilson is Partner corporate finance at Alantra