Waste Management to Acquire Advanced Disposal for $4.9B

Houston-based Waste Management, Inc., North America’s largest environmental solutions company, just announced that it will buy Ponte Vedra, Fla.-based Advanced Disposal Services for a total of $4.9 billion.

Under the agreement, 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 percent to Advanced Disposal’s closing share price as of April 12, the last trading day prior to the April 15 announcement and a premium of 20.9 percent to Advanced Disposal’s 30-day volume weighted average price as of the same date.

Over the weekend, The Wall Street Journal reported that Waste Management was nearing a deal to buy Advanced Disposal Services, making the acquisition one of the largest solid waste company acquisitions.

According to Waste Management, this acquisition grows Waste Management’s footprint and allows it to deliver to Advanced Disposal customers “unparalleled access to differentiated, sustainable waste management and recycling services.”

“At Waste Management, we focus on creating value for all stakeholders, delivering on our commitments to employees, customers, community partners, shareholders and the environment. 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 CEO of Waste Management, in a statement. “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. Waste Management’s disciplined capital allocation and balance sheet strength position us well to execute upon this unique opportunity to expand our scale and capabilities to serve an even broader customer base and realize the strategic and financial benefits the acquisition of Advanced Disposal creates.”

With 2018 revenues of $1.56 billion, adjusted EBITDA of $427 million and approximately 6,000 employees, Advanced Disposal serves more than 3 million residential, commercial and industrial customers, including more than 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.

“We are pleased to have reached this milestone agreement with Waste Management to deliver an immediate cash premium to Advanced Disposal stockholders. We view Waste Management as an industry leader with one of the most respected brands in the nation,” said Richard Burke, CEO of Advanced Disposal, in a statement. “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. We look forward to working with the Waste Management team to complete the transaction and ensure that we continue to deliver the highest quality service to our customers.”

Strategic and Financial Benefits

The acquisition advances Waste Management’s growth strategy and aligns with the company’s financial goals, including growth in earnings per share, margins and cash flow. Specifically, Waste Management expects the addition of Advanced Disposal to:

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 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 2.75 to 3 times.

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 percent of Advanced Disposal’s outstanding shares, has, under the terms of a voting agreement, agreed to vote its shares in favor of the transaction.

Both Waste Management and Advanced Disposal said they remain confident in the strength of their businesses and expect to achieve previously announced full-year guidance, excluding transaction-related considerations.

As previously announced, Waste Management will release its first quarter 2019 financial results before the opening of the market on Thursday, April 25 and will hold a conference call at 10 a.m. ET. On the call, Waste Management’s management team also will discuss the Advanced Disposal acquisition announcement.

Advanced Disposal will release its first quarter 2019 financial results on Tuesday, April 30 after closing of the market. In light of the pending acquisition, Advanced Disposal will no longer host its conference call on Wednesday, May 1 or attend the Macquarie Business Services Conference on Thursday, May 2 in Boston.

Centerview Partners LLC is serving as exclusive financial advisor to Waste Management, and Simpson Thacher & Bartlett LLP and Vedder Price P.C. are serving as Waste Management’s legal counsel. UBS Investment Bank is serving as exclusive financial advisor to Advanced Disposal, and Shearman & Sterling LLP and Mayer Brown LLP are serving as Advanced Disposal’s legal counsel.