Allied Waste Seeks Strong Assets in Recent Billion-Dollar Deal

Melanie A. Lasoff

The recent acquisition of No. 2 waste disposal firm Browning-Ferris Industries Inc. (BFI), Houston, by No. 3 Allied Waste Industries Inc., Scottsdale, Ariz., will allow Allied to build wealth, grow into untapped regions and become the second largest waste services company in the world, says Thomas H. Van Weelden, chairman and CEO of Allied.

"[BFI] is in a number of markets we didn't serve," he says. "We believe BFI had the strongest North American franchise out there, bar none. This [acquisition] is a huge opportunity to marry up with a strong asset base." The company also will experience growth and gain value, Van Weelden says.

The deal, amounting to about $9.1 billion in cash and debt, is the latest for Allied Waste, which will pay $45 per share for each of BFI's 157 million outstanding shares and assume the company's $1.8 billion in debt. The transaction will be finalized within the next six to eight months.

Van Weelden says he anticipates that the majority of BFI employees will join the new organization, to be headquartered in Scottsdale and run by Allied's senior management team. Allied will add two operating regions to its current six, and BFI districts will continue to be run by BFI district managers, he says.

"Most of the BFI employee base supplies the services on a day-to-day basis, and will continue to supply those services," Van Weelden says. "BFI will continue business as usual with a little more autonomy and freedom on a local level."

Eric Graves, vice president of corporate communications for BFI, says he is pleased Van Weelden has acknowledged the value of BFI's name.

"It was nice to see him say [in a recent press conference] that he expects to use that [BFI] brand in markets where we are strongly represented," Graves says.

That is just part of the transaction's appeal, he adds.

"Our board thought the $45 per share was attractive, especially because there were relatively few conditions attached to it," Graves says.

Allied also recently secured deals with a dozen other solid waste companies, acquiring 11 collection, recycling and disposal companies, and buying and selling services with another.

The 11 companies, based in northern New Jersey and Hartford, Conn., were represented by Wellesley Services LLC, a private mergers and acquisitions consulting company.

Allied Waste paid $100 million for the New Jersey-based Joe DiRese and Sons, Vincent M. Ippolito; Robert A. Pisano and Sons and Bi-State Recycling; James J. Cilano Disposal Service; Garofalo Brothers Inc.; Garafolo Recycling & Transfer Station Company Inc.; Rotundo Sanitation Company Inc.; Action Recycling Inc.; and the Connecticut companies McCauley Enterprise Inc. and Capital Recycling Inc.

The companies have an annual combined revenue of more than $50 million, compared to Allied's approximate annual revenue of $1.7 billion. The purchase is part of Allied's acquisition philosophy, Van Weelden says.

"We want to build fully integrated operating markets that are geographically dispersed with strong local management," he says. "Those [companies] all fit."

Waste Connections Inc., Roseville, Calif., also recently sold Allied solid waste services assets in Washington state, including collections operations in Issaquah and Maltby. Allied sold Waste Connections services assets in Nebraska, including its collection and transfer operations in Norfolk and Fremont, and its landfill operating contract in Columbus. The deal represents about $7 million in acquired revenues and was expected to close in March 1999.

What other acquisitions are looming for Allied? Van Weelden says he anticipates the company will make $300 million in acquisitions per year in large and small companies. Allied first will focus on streamlining its existing markets by, for example, buying a transfer station where it already owns a landfill. "We will be seeking the missing pieces to the puzzle of our acquisitions," Van Weelden says. "We're very much in the 'serve the market you're in' mentality."