Closing Ranks

Chris Carlson

Officials of waste industries USA, Raleigh, N.C., are looking to take the company private. They say being publicly traded has narrowed the company's investment focus and prevented it from making long-term investments that would sustain and enhance its future.

In a letter to the board of directors recently filed with the Securities and Exchange Commission, Lonnie Poole Jr., the founder and chairman of Waste Industries, outlined the proposed plan for the transaction. An investment group led by Poole and Jim Perry, the company's president and CEO, that also includes Macquarie Infrastructure Partners and Goldman Sachs wants to buy back 100 percent of the company's outstanding shares in cash at $36.75 apiece — a price that exceeds the stock's all-time high. The group currently owns 51 percent of the company's common shares.

The group pointed to an “intense focus” by investment analysts and public shareholders on short-term quarterly earnings as one of the main reasons for transitioning to a private company. In addition, according to the letter, shares have endured price volatility and restricted liquidity due to the company's small public float and limited trading volume. Poole also expressed concern regarding the negative impact that regulatory costs and management resource expenditures had on his modestly sized company.

The proposal is currently being reviewed by an independent committee appointed by the company's board of directors. Carol Dalton, investor relations and SEC reporting analyst for Waste Industries, says there is no timetable for the committee's decision. If the committee approves the proposal, the group has promised that there will not be any operational or staffing changes to the business. The corporate headquarters will remain in Raleigh, N.C., and the company will continue its current support for local community programs and charitable organizations.

The majority of the proposal's financing would be provided by Wachovia Bank and HSBC Securities, who would provide a combined $269 million. That money would be used to pay off the company's existing loans in addition to buying back shares. Macquarie would invest $126 million in cash and Goldman Sachs would invest $63 million in cash. The rest would be supplied by the Poole family and Perry, who would invest a total of $24 million.

Waste Industries went public in 1997. It recently ranked 16 on this year's Waste Age 100 list of the largest solid waste firms in the industry. The company submitted a projected revenue of $336 million for 2007, against a 2006 revenue of $328 million.