Weekly News Bulletin: Oct. 14-20, 2008


Waste Management Withdraws Offer for Republic

As expected, Waste Management formally withdrew its $6.73 billion ($37 per share) takeover offer of Republic Services, citing troubled financial markets that would make the acquisition too risky. Republic never cottoned to the takeover offer which it viewed as a deliberate attempt to derail its $6.7 billion deal to merge with industry number two Allied Waste Industries. Waste Management's initial offer of $34 per share which it later only slightly increased to $37 seemed to indicate that its heart was never in it from the beginning. Most of us believed then as now that the company would have had to offer over $40 per share to be taken seriously by Republic. On the other hand, the withdrawal of the offer demonstrates financial prudence of the company which continues to value return on invested capital over market share. CEO David Steiner said that he expects to report third quarter revenues of $3.53 billion, a 3.6% increase compared with the third quarter of 2007. He expects the company to record earnings of between $0.62 and $0.63 per share for the quarter which exceeds the Wall Street consensus estimate of $0.60 and represents a 15% increase over the reported results for last year's quarter...Read More »



Republic and Allied Shareholders to Vote on Merger Nov. 14

Shareholders for both Allied Waste Industries Inc. and Republic Services Inc. will meet on November 14 to approve merger plans and Republic's offering price of 0.45 shares for each share of Allied. A possible impediment to the deal was eliminated this week by Waste Management's formal withdrawal of its offer to buy Republic instead. Upon approval of the deal as it now stands, Allied Waste shareholders will own 51.7% while Republic shareholders will own 48.3% of the combined company which is to be called Republic Services. Republic expects to issue approximately 196.2 million shares of stock to complete the deal. The company will reserve another 14.1 million shares to cover stock options and convertible debentures according to a filing with the Securities and Exchange Commission...Read More »



Landfill and Service Pricing Up Significantly Despite Drop in Volume

Recent surveys of waste disposal and processing facilities indicates continued pricing strength in the industry despite a small decline in waste volumes. Prices nationally are up nearly 4% among all facility types including landfills, transfer and processing facilities and waste-to-energy plants. Landfill pricing is up by 6.2% in the last twelve months even though volumes are off by 3%. Pricing is particularly strong in the northeast where declining landfill capacity in that region coupled with increased transportation costs to export waste elsewhere has pushed pricing up by 8% in the last year. The decline in volume is a composite of steadily increasing residential waste volumes that comprise a third of the waste stream offset by commercial and construction debris volumes, comprising a third of the waste stream, that are off by as much as 15% to 20% year over year in the troubled economy.

Pricing strength stems from increased market discipline among the publicly traded and private companies that now control over two-thirds of the business on a volume basis. Their focus on return on invested capital, vertical integration through higher internalization rates and higher margin businesses builds pricing momentum. Add to that increased fuel, healthcare and insurance costs which is forcing some unity among providers to raise prices accordingly...Read More »



All Eyes on Divested Assets - Waste Connections Could Be Winner

With Waste Management's offer to purchase Republic Services now off the table, all eyes are now on what is to become of assets that might be divested as a result of Republic's merger with Allied Waste, now expected to proceed unabated. Brian J. Butler, of investment research firm Friedman, Billings, Ramsey is convinced that Waste Connections, with nearly $1 billion in cash from a recent stock offering, is a leading contender for these assets. This stems from speculation that the Department of Justice may require significant divestitures given the size of Republic and Allied and their market overlap. Moreover, the complexity of the Republic / Allied deal will probably encourage the desire to sell divested assets in a lump sum. This limits the number of qualified buyers. Other bidders could include BFI Canada, which recently transformed itself into a corporate structure for just such purposes, Veolia, a significant player and even more so internationally, Waste Services which recently refinancedits debt, and Waste Industries USA, which took itself private last year...Read More »



EPA Signs Revised Rule to Encourage Recycling Hazardous Materials

U.S. EPA Administrator Stephen Johnson signed a Final Definition of Solid Waste Rule on October 7 meant to encourage the recycling of hazardous secondary materials rather than their disposal as waste. The new rule streamlines the regulation of these materials, mostly certain manufacturing byproducts and residues, and excludes them from hazardous waste regulations while restricting the list to just those that can legitimately be recycled. Environmentalists however are voicing strong opposition to the rule, claiming it will have broad deregulatory impacts. Earthjustice added that "hazardous waste, called by any other name is still hazardous." While not objecting to the revisions, the Solid Waste Association of North America is warning its members to carefully screen incoming waste lest hazardous materials slip into the waste stream because of the rule change...Read More »



Waste Services Completes $300 Million Refinancing

Waste Services, Inc. said it completed a $300 million refinancing involving its term loan and revolving credit facilities. The new credit facility consists of a US$39.9 million term loan, a CD$132.1 million term loan and US$139.6 million in a dual-currency revolving credit line. The term loans and revolver mature in 2013 and bear interest at LIBOR plus 3.5% on U.S. borrowings and a comparable rate on Canadian borrowings. A consortium of nine commercial banks led by Barclays Capital and Banc of America Securities LLC arranged the financing...Read More »



Wastequip Appoints New CEO

Beachwood, Ohio-based Wastequip, Inc. announced the promotion of John Scott as president and CEO, effective immediately. Previously, Scott was president of the company's specialty group. He succeeds the much venerated Bob Rasmussen who is retiring after a nearly 50-year career in the waste equipment industry. "Since joining Wastequip, John Scott has demonstrated exceptional business skills, drive and leadership," said Rasmussen. "I am delighted that Wastequip's future is in his capable hands."...Read More »



Pennsylvania DEP Approves PPL's Cumberland LFGTE Project

Electric utility PPL Corp. announced that it received approval to begin operating its company owned landfill gas-to-energy (LFGTE) project at the Cumberland County Landfill in Pennsylvania. The project received approval from the state Department of Environmental Protection this week and is supposed to be up and running by the end of the year. The project will purchase the gas from the landfill and generate enough electricity to power about 5,200 homes. Pennsylvania has more than 30 other gas-to-energy projects, making it one of the nation's leaders...Read More »



Waste Services to Announce Third Quarter Results October 21

Waste Services plans to announce third quarter financial results at the close of the market on Tuesday, October 21 and host a conference call the following day at 10 a.m. (Eastern) to discuss them...Read More »



CleanTech Biofuels Completes Acquisition; Moves to Develop Commercial Site

CleanTech Biofuels, Inc. said it had closed the merger of Biomass North America Licensing, Inc. thus paving the way to implement its newly acquired technology at a commercial waste transfer station in Chicago, Illinois that will produce cellulosic biomass from municipal solid waste. The biomass produced can be used for a variety of purposes, including conversion to ethanol and diesel or as a fuel in existing coal-fired power plants...Read More »


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