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Severn Trent get Hales in the can.

Byline: Richard Tyler

Severn Trent yesterday took its share of the nation's waste market to 12 per cent after snapping up rival company Hales from RMC for pounds 141 million.

The 450 Hales dustman's lorries, 1,000 staff and eight landfill sites will be integrated into Severn Trent's waste business, Biffa, which currently has ten per cent of the market.

'We've got a good geographic coverage and this complements it well, especially in London and southeast England,' said Biffa managing director Martin Bettington.

Biffa believes that by closing down Hales' head office in Hertfordshire and rationalising its network of depots, it can save the combined business pounds 7.5 million in costs a year.

'With an acquisition there are bound to be some job losses,' said a spokesman. 'The process takes two to three months and we would hope to keep them to a minimum.'

Severn Trent is paying RMC eight times Hales' 2002 earnings, before cash and non-cash charges. The integration will cost pounds 10 million.

'It's a sensible acquisition but an expensive one,' said Commerzbank analyst Simon Edrich, who has a 'hold' rating on Severn Trent shares.

When RMC put Hales up for sale last October analysts had pencilled in a price of between pounds 135 million to pounds 190 million for the business.

But trading conditions for waste companies have become tougher since then as higher regulatory costs bite and industrial customers, suffering from an economic downturn, produce less waste.

This has prompted consolidation, with Severn Trent's move following the takeover of Britain's biggest rubbish disposal company, Waste Recycling Group, by financier Guy Hands.

Shares in rival Shanks Group climbed almost ten per cent yesterday as investors speculated it could be the next bid target. Severn Trent's shares closed up 5 1 /2p at 702p.
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Jun 21, 2003
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