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Stericycle Inc. ( SRCL - Analyst Report ) has completed its pending acquisition of Healthcare Waste Solutions, Inc. ("HWS") following an agreement with the U.S. Department of Justice and the State of New York providing clearance for the transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Healthcare Waste Solutions will now become a wholly owned subsidiary of Stericycle. The newly acquired unit will add approximately $45 million in annualized revenues. Stericycle plans to complete the HWS integration in 2011. Stericycle anticipates that the fully integrated acquisition will be accretive in 2012 by approximately 4 cents per share prior to any transaction and transition expenses.
Prior to the closing, Stericycle and HWS agreed to reduce the total merger consideration payable in cash from $245.0 million to $237.0 million, subject to various adjustments, including a reduction of HWS indebtedness as of the closing date, provided for in the merger agreement.
In September 2010, Stericycle had entered into a merger agreement for the acquisition of Healthcare Waste for $245 million in cash. The latter provides a resource management assessment and consulting program for all waste streams to healthcare providers and is also engaged in the collection, transportation, treatment and disposal of medical waste, universal waste and other regulated wastes, sharps management services, safety and compliance training, and other related businesses.
This is Stericycle’s largest acquisition in the past 12 months, topping the previous $180 million MedServe acquisition in 2009. A significant portion of Stericycle’s historical growth was due to the successful integration of acquisitions in both domestic and international markets. The company is continuously looking for strategic acquisitions that will further strengthen its existing market position and expand its geographic base.
During the fourth quarter of 2010, the company completed an unprecedented 17 acquisitions, of which 16 were regulated waste and compliance services businesses and one was a returns management business.
During 2010, Stericycle completed 33 acquisitions, the highest in the last decade compared with 23 acquisitions made in 2009 and 22 in 2008. Furthermore, Stericycle’s merger and acquisition pipeline both in the United States and abroad remains quite robust, representing approximately $100 million in additional revenue.
The recent completion of the HWS acquisition and further rollout of new products like Steri-Safe and Bio Systems add to the company’s growth potential. However, the increase in overhead costs and integration-related expenses could have an adverse impact on its operating margins. The shares of Stericycle currently retain a Zacks #3 Rank (short-term Hold recommendation).
Lake Forest, Illinois-based Stericycle’s customers fall into two categories – small-accounts (outpatient clinics, medical and dental offices, long-term and sub-acute care facilities, and retail pharmacies) and large-accounts (hospitals, blood banks and pharmaceutical manufacturers). The company caters to a wide clientele spanning domestic and international markets. Stericycle competes with US Ecology Inc. ( ECOL - Snapshot Report ) and Waste Management Inc. ( WM - Analyst Report ) .
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