Largest US Waste & Recycling Firm Continues to Expand

Waste Management to Make $4.9bn Acquisition of Advanced Disposal

Waste Management, the largest waste and recycling firm in the US, is to Acquire Advanced Disposal for $4.9 Billion Adding Complementary Assets and Customer Base in the Eastern United States.

Image © Waste Management Inc.

Houston based Waste Management, the largest waste and recycling firm in the US, is to Acquire Advanced Disposal for $4.9 Billion Adding Complementary Assets and Customer Base in the Eastern United States.

The two firms have entered into a definitive agreement under which a subsidiary of Waste Management will acquire all outstanding shares of Advanced Disposal for $33.15 per share in cash, representing a total enterprise value of $4.9 billion when including approximately $1.9 billion of Advanced Disposal’s net debt.

The per share price represents a premium of 22.1% to Advanced Disposal’s closing share price as of April 12, 2019, the last trading day prior to the announcement, and a premium of 20.9% to Advanced Disposal’s 30-day volume weighted average price as of the same date.

Waste Management said that then acquisition grows its footprint and allows Waste Management to deliver to Advanced Disposal customers unparalleled access to differentiated, sustainable waste management and recycling services. With 2018 revenues of $1.56 billion, adjusted EBITDA of $427 million and approximately 6000 employees, Advanced Disposal collects and handles waste from more than 3 million residential, commercial, and industrial customers, including over 800 municipalities primarily in 16 states in the Eastern half of the United States. Advanced Disposal’s solid waste network includes 94 collection operations, 73 transfer stations, 41 landfills, and 22 owned or operated recycling facilities.

“The acquisition of Advanced Disposal extends these commitments by adding complementary assets and operations as well as a team with a shared focus on safety, outstanding service and operational excellence,” said Jim Fish, President and Chief Executive Officer of Waste Management.

“With this acquisition, we will grow our asset footprint to serve more customers and communities and generate significant growth and value creation opportunities for Waste Management’s shareholders and our combined company’s employee base,” he continued.

Richard Burke, Chief Executive Officer of Advanced Disposal added: “We are pleased to have reached this milestone agreement with Waste Management to deliver an immediate cash premium to Advanced Disposal stockholder… This acquisition stands as a testament to the strength of the Advanced Disposal business and brings together two strong waste management teams with extensive environmental services expertise to better serve our customers and communities.”

Strategic and Financial Benefits

Waste Management said that the acquisition advances its growth strategy and aligns with its financial goals, including growth in earnings per share, margins, and cash flow. Specifically, Waste Management said that it expects the addition of Advanced Disposal to:

  • Expand Waste Management’s Footprint and Customer Base. This acquisition brings a high-quality, complementary asset network and customer base under Waste Management’s proven management team, who has a track record of operational excellence and a demonstrated ability to grow the margins and cash flows of the assets Waste Management has acquired.
  • Create Significant Synergies and Grow Waste Management’s Earnings and Cash Flows. Waste Management expects the transaction to generate more than $100 million in annual cost and capital expenditure synergies. The Advanced Disposal acquisition will be immediately accretive to Waste Management’s adjusted earnings per share and cash flow, with near-term benefits expected from core operating performance and SG&A cost savings. Incremental benefits from operating and capital efficiencies and network optimization will drive long-term margin expansion and improved free cash flow conversion.
  • Support Waste Management’s Capital Allocation Priorities. Waste Management’s strong balance sheet and significant free cash flow generation position it well to fund the acquisition. In 2019, Waste Management’s free cash flow will be directed to dividend payments, acquisitions and share repurchases sufficient to offset dilution from stock-based compensation plans.
    The A acquisition is expected to enhance Waste Management’s cash flow growth and support its commitment to grow shareholder returns. Waste Management currently expects to achieve targeted leverage and return to normal run-rate share repurchases within one year of the acquisition’s close.
  • Continue a Commitment to Outstanding Customer Service and Sustainable Waste Solutions. The acquisition will join two teams of dedicated employees who are passionate about helping to manage the environmental needs of customers and communities with outstanding service and a commitment to safety. Waste Management expects to continue making investments in employees, technology, and capital equipment to further grow the business, and ensure superior, reliable customer service, and generate strong returns.

Financing
The transaction is not subject to a financing condition. Waste Management intends to finance the transaction using a combination of bank debt and senior notes.

Following completion of the transaction, Waste Management said that it expects to maintain a strong balance sheet and solid investment grade credit profile with a pro forma leverage ratio within the Company’s long-term targeted net debt-to-EBITDA range of 2.75x to 3.0x.

Timing and Approvals
The transaction, which was unanimously approved by the boards of directors of both companies, is expected to close by the first quarter of 2020, subject to the satisfaction of customary closing conditions, including regulatory approvals and approval by a majority of the holders of Advanced Disposal’s outstanding common shares.

In connection with the definitive agreement, Canada Pension Plan Investment Board, which owns approximately 19% of Advanced Disposal’s outstanding shares, has, under the terms of a voting agreement, agreed to vote its shares in favour of the transaction.