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A Closer Look at WM's Acquisition of Advanced and the Sale of Divestitures to GFL

Date: November 5, 2020

Source: News Room

A Closer Look at Waste Management's Acquisition of Advanced Disposal and the Sale of the Required Divestitures to GFL Environmental

 

Waste Management's (Houston, TX) recent massive $4.6 billion acquisition of Advanced Disposal (Ponte Vedra Beach, FL) has already reshaped the industry, giving the company command of even greater landfill volumes. To allay concerns by the U.S. Department of Justice (DOJ) and Federal Trade Commission that the merger would inhibit fair competition in various markets with considerable overlap of operations, they are requiring the company to divest of landfills, transfer stations and hauling operations collectively valued at $863.5 million. Canadian company GFL Environmental (Vaughan, Ontario) is buying those operations. Those assets include 15 landfills, 37 transfer stations, 29 hauling facilities, over 200 waste collection routes and other assets across 10 states that last year brought in sales of $345 million.

Net of the divestitures, Waste Management gains 29 landfills, 48 transfer stations,18 materials recovery operations and numerous collection routes and other assets across 17 states.

Map Depicting Waste Processing and Disposal Assets Acquired by Waste Management and Those Divested to GFL Environmental

Source: Waste Business Journal

DOJ identified market competition concerns across 33 geographic markets for smaller container commercial waste (SCCW) and 24 markets for MSW disposal in Alabama, Florida, Georgia, Illinois, Indiana, Michigan, Pennsylvania, and Wisconsin. You can see from the map above how these are primarily focused.

The deal had a total enterprise value of $4.6 billion, with Waste Management paying $30.30 per share in cash and assuming Advanced Disposal's $1.8 billion of net debt. When the deal was first announced in April 2019, Waste Management intended to pay Advanced Disposal $33.15 per share in cash and assume about $1.9 billion in net debt - valuing the deal around $4.9 billion - but the price was adjusted last June amid the vastly changed world under COVID-19.

Waste Management said it expects at least a $100 million in reduced cost synergies from the deal. It also boosts the company's market share. As indicated in the graph below, the company's share of landfill volume alone has grown from 26 percent of the total industry to 29 percent. That represents nearly 10 million more tons of annual landfill volume. The divestitures doubles GFL's US landfill volumes to 16 million tons from 7 million tons prior to the acquisition, raising its share of US landfill volumes to 4 percent from 2 percent of the market.

Market Share in Landfill Tonnage AFTER Acquisiton and Divestitures

Source: Waste Business Journal

Market Share in Landfill Tonnage BEFORE Acquisiton and Divestitures

Source: Waste Business Journal

GFL financed its acquisition, along with that of WCA Waste Corp last month for $1.2 billion, in part with earlier offerings of $750 million in secured notes and a private placement of $600 million of preferred shares. That brought with it 37 collection and hauler operations, 27 transfer stations, two MRFs and 22 landfills across 11 states but primarily in Texas, Missouri, and Florida.

GFL was among the few contenders such as Waste Connections that had the financial wherewithal to secure the deal. But GFL had a much more limited footprint necessary to preserve competition as required by the Justice Department.

It's very likely that both GFL and Waste Management will engage in future deals including other mergers, smaller tuck-ins, asset swaps and such to enhance the efficiencies of the newly acquired assets as they seek to integrate them into their existing operations.

 

Waste Business Journal conducts research of the waste management industry and publishes a variety of reports and products that detail its findings. To learn more, visit: https://www.wasteinfo.com.

Reference:
Justice Department Requires Waste Management to Divest Assets in Order to Proceed With Advanced Disposal Services Acquisition