Guy Hands on buying trail

CITY wheeler-dealer Guy Hands' attempts to become Britain's rubbish dump king were laid bare today as it emerged that he is looking at at least four major landfill businesses to augment last year's £530m acquisition of Waste Recycling Group by his Terra Firma venture capital fund.

Following revelations that he has offered about £1bn for South West Water group Pennon with its highly rated Viridor Waste subsidiary, it also emerged that Hands has been secretly negotiating to buy the £200m UK landfill business of Shanks.

To complete a complicated menage a trois, Pennon also confirmed today that it is attempting to buy Shanks' landfill operations.

The multi-millionaire former Nomura banker is attempting to build a waste empire to take advantage of environmental regulations governing the burial of rubbish rather than its incineration.

In addition, the methane gas byproduct of landfill can generate electricity, which receives tax benefits under Government plans to promote renewable energy sources.

Waste has become Hands' new interest after he was forced to check out of the luxury hotels business with the failure of Grosvenor House and Waldorf chain Le Meridien.

As well as interests in Pennon and Shanks, Terra Firma is hedging its bets by running an eye over 'a couple of other' landfill operators in a market in which Severn Trent's Biffa has built up a large share via last year's acquisition of rival Hales.

In a flurry of Stock Exchange announcements today, Shanks said it had been talking with Pennon for some months over the sale of its landfill interests, a deal that had got to 'an advanced stage'. But it also revealed that Hands is trying to break up the deal.

'After conducting initial due diligence, Terra Firma wrote to Shanks seeking to impose a number of preconditions. These included underwriting its costs and entering into a period of eight weeks exclusivity,' said the Shanks statement.

'Given the indicative price relative to Pennon's offer, the board rejected this proposal. Terra Firm has recently reapproached Shanks. The above preconditions have been removed and the indicative price has been improved [but] there is uncertainty over whether Terra Firma's approach would lead to a binding offer.'

Separately, Pennon confirmed the advanced state of talks with Shanks and said a deal would enable it to continue raising its dividend to shareholders. It also confirmed Hands' bid for the whole of Pennon and said the board 'unanimously' rejected it as too low.

Shanks' shares rose to a two-year high, up 10 1/2p at 136p. Pennon shares were steady at 703 1/2p.