(Adds Renewi CEO comment in paragraph 3, details of transaction in paragraph 4, analysts' comment in paragraph 5)

May 30 (Reuters) - Waste management firm Renewi plans to sell its UK Municipal business to Biffa Ltd as it fully shifts focus to European recycling markets in line with last year's strategic review, the London-listed company said on Thursday.

Renewi said it will make the transaction through a combination of a nominal cash consideration payable to Biffa and an expected 125-million-pound ($158.6 million) capitalisation of UK Municipal to help the divested business fulfil its future contractual obligations.

"Biffa's financial position, operational expertise, and presence in the UK municipal landscape make them the right new home for our UK Municipal business," Renewi CEO Otto de Bont said in a statement.

Renewi said the expected capitalisation, when offset against the reduction of liabilities of 89 million euros ($96.1 million), equates to a net cost of about 57 million euros to Renewi, and a total cash impact of 154 million euros, including transaction costs.

Peel Hunt analysts said in a note that Renewi has effectively delivered the planned exit from UK Municipal at no greater a cost than already provided, ex-transaction costs and is now a much simpler entity that should appeal more widely.

($1 = 0.7881 pounds) ($1 = 0.9264 euros) (Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Janane Venkatraman and Sohini Goswami )