Key points:
- Biffa bid is back but at the lower price of 410p
- BIFF shares at now near exactly at the bid price – there's no game to play here
- What is interesting is the insight this gives us into Next/Joules Group
Biffa (LON: BIFF) shares are up 29% this morning as the discussed bid for the company comes through. The big difference is that this is at a lower price than was first indicated – an unusual but not impossible occurrence. For it depends upon exactly how the initial offer is couched as to whether a bidder can in fact come back with a lower offer. As we note when discussing the Next/Joules affair, exactly how the phrasing is done makes all the difference.
As to the Biffa bid, the initial announcement was back in June, that there had been a number of non-binding offers. There was an indicative price of perhaps 445p – but no certainty that that would be the price. As we can see from the below chart that then boosted the Biffa share price. That negotiations carried on, there was no swift conclusion, led to some dropping off in that BIFF share price. Bad results, the general state of the economy, inflation, did not help either.
Now, today, we get the final announcement. The bid is to go ahead but at 410p per share, not that previously indicated 445p. Biffa shares are now up to within a hair's breadth of that bid price. It also seems vanishingly unlikely that anyone else is going to intervene – if there had been other serious interest then we would almost certainly have seen something happening this past three months.
What to do with Biffa shares is thus fairly obvious. The difference between the current share price and the bid is fractions of a penny, this is less than interest or inflation on the bid period. No point in trying to play this offer and little in holding – probably sell and redeploy the cash. That changes if there's another bidder to be flushed out so actual decision making depends upon views on that.
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The specifics of the Biffa bid are therefore simple enough. What this can also do for us though is given an insight into why that Next and Joules Group combination did not work. Think on it – the Biffa bid has come back at a lower price because economic conditions have changed in the interim. Well, OK. So, why can't the Next combo with Joules do the same? Because in the Joules announcement of the possible investment their statement said “at not less than current market price” or some such phrase. Meaning the 31p at that time. Matters have changed in the interim – but Next cannot massage that offer down because they were so insistient upon that price in the first place.
The lesson for us here being that the details of corporate announcements really do matter. Say “We'll bid, maybe, at this price” and the bid can come in lower if circumstances dictate. Say “No lower than” and it's not possible to go lower. It's possibly even a bit old fashioned but in the London Stock Market your word is still your bond.
