Waste Management Buys Advanced Disposal For $3B

Waste Management, Inc. WM reached an agreement to acquire solid waste company Advanced Disposal Services Inc ADSW for $2.9 billion.

What Happened

As part of the merger agreement, a subsidiary of Waste Management will acquire all outstanding shares of Advanced Disposal for $33.15 per share in cash. The price tag on the deal implies a 22.1 percent premium to Advanced Disposal's closing Friday price and a premium of 20.9 percent to its 30-day volume weighted average price.

Waste Management plans on financing the deal through a combination of bank debt and senior notes. Exiting the deal the company expects to maintain a solid investment grade credit profile. The deal represents a total enterprise value of $4.9 billion when including about $1.9 billion of Advanced Disposal's net debt.

"The deal brings together the No. 1 and No. 4 companies in the sector and is Waste Management’s biggest acquisition ever," according to The Wall Street Journal.

Why It's Important

Waste Management said the rationale behind the deal is four-fold:

• Acquiring a high-quality and complementary asset network to expand its footprint;
• Generate more than $100 million in annual cost and capital expenditure synergies;
• Enhance cash flow growth and support management's commitment to growing shareholder return; and
• Better manage the environment needs of customers and communities.

The companies expect the deal to close by the first quarter of 2020 and remains subject to approval by Advanced Disposal's investors. Canada Pension Plan Investment Board, an owner of around 19 percent of Advanced Disposal's shares, has already agreed to vote in favor of the deal.

Shares of Advanced Disposal were trading higher by more than 18 percent at $32.24 following the announcement, while Waste Management's stock was up by around 2.2 percent.

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Photo courtesy of Waste Management.