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Progress on Shanks-Van Gansewinkel merger

Shanks says “significant progress” has been made in negotiations over a merger with the Dutch recycling firm Van Gansewinkel (VGG).

The proposed deal, announced on 7 July, would be a reverse takeover by Shanks, with the continental firm twice its size and valued at €440m (£380m).

VGG shareholders would receive €306m in cash and share consideration, representing 29% ownership of the combined group.

In an update on progress, Shanks’ board says the binding exclusivity agreement between Shanks, VGG Holdco (VGG’s parent company) and its two largest shareholders will be extended beyond the original expiry date of mid-September.

The statement said: “Significant progress has been made on the financial, commercial, operational, environmental, HR and legal due diligence associated with the proposed merger with VGG.

“In addition, good progress has been made in relation to the other principal pre-conditions, including, inter alia, the proposed terms of the transaction, financing, the negotiation of a sale and purchase agreement, anti-trust preparation for clearance and the relevant works council advice proceedings.”

The statement reveals that the board believes a merged company could achieve aggregate annual risk-weighted pre-tax cost synergies of approximately €40m in the third full financial year following merger. It estimates that 30% of these synergies would be delivered in the first year, 75% in the subsequent 12 months and 100% the year thereafter.

“These synergies would be contingent on the completion of the merger, and could not be achieved by the Shanks Group and the VGG Group operating independently,” it adds.

Integration and realising the savings will result in one-off costs of approximately €50m in the three years.

It says no definitive or binding documentation to effect the merger has yet been signed and “there can be no certainty that the merger or any other transaction with VGG will ultimately occur”.

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