Advanced Disposal Commences $375M IPO

Advanced Disposal is moving ahead with its postponed initial public offering aiming to raise $375 million with the sale of 19.25 million shares of common stock. The Ponte Vedra, Fla.-based hauler had originally planned to go public in February, but, like a handful of other firms with similar plans, it was forced to postpone the IPO at a time when equities markets were roiled.

All of the shares are being offered by the company. The company's common stock has been approved for listing on The New York Stock Exchange under the ticker symbol ADSW. The underwriters have the option to purchase up to an additional 2,887,500 shares of common stock. The company expects the shares to be priced between $18 and $21 per share, according to a company filing. At the high end, the IPO would be worth $404 million. The IPO pegs the overall value at the company at about $1.8 billion.

Advanced Disposal intends to use the net proceeds from the shares offered to repay outstanding borrowings under the Term Loan B portion of its senior secured credit facilities.

The offering comes less than two months after Canada Pension Plan Investment Board (CPPIB) completed a $280 million investment in Series B Preferred Units of Star Atlantic Waste Holdings II L.P., which is an investment partnership sponsored by Highstar Capital and the principal owner of Advanced Disposal Services.

According to the terms of that deal, CPPIB's investment will automatically be converted into common stock if Advanced Disposal Services Inc. completes its IPO.

Proceeds of that sale were used to redeem an investor's Series A partnership investment, and all remaining Series A Preferred Units were converted into Series B Preferred Units, which will result in lower preferred stock accrual expenses.

Advanced Disposal has the financial backing of private equity firm Highstar Capital. Highstar was purchased by Oaktree Capital Group in June 2014 and that deal included some conditions that may have contributed to the August deal.

According to a 2015 Waste360 interview with Stifel analyst Michael E. Hoffman, “Remember, Highstar (Advanced Disposal’s owner) sold a big chunk of Highstar to Oaktree, and retained this fund that holds the ADS portfolio position. We believe they have time-line milestones to hit when they start monetizing that portfolio; otherwise, ownership begins to accrue to Oaktree. I think there’s a little bit of, if you’re going to the public market, you’ve got to start that process sooner or later in order to create an orderly exit. You’re not exiting all in the first go, right? The stock market won’t let you do that.”

Deutsche Bank Securities Inc., Credit Suisse Securities (USA) LLC and Barclays Capital Inc. will act as lead joint book-running managers and representatives of the underwriters for the offering. UBS Securities LLC is also acting as a lead joint book-running manager. Merrill Lynch, Pierce, Fenner & Smith Incorporated, Macquarie Capital (USA) Inc., Morgan Stanley & Co. LLC, and Stifel will also act as joint book-running managers, and SMBC Nikko Securities America, Inc. and First Analysis Securities Corporation will act as co-managers.