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Covanta Holding (CVA) to be Acquired by EQT Infrastructure

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Covanta Holding Corporation signed an agreement to sell all its shares to EQT Infrastructure for $5.3 billion including the company’s net debt obligations. The deal value of $20.25 per share is set at a 37% premium to the Covanta Holding’s stock price on Jun 8, a day before media speculations were rife on this transaction.

The transaction is contingent on Covanta Holding’s shareholders’ and customary government approvals. Subject to necessary sanctions, the deal is likely to be complete in the fourth quarter of the ongoing year. The agreement is the outcome of a competitive sale process, the analysis of which was carried out during the past nine months to enhance the company’s shareholder value.

Company Details

Covanta Holding is among the world leaders in sustainable waste and energy solutions, and processes nearly 21 million tons of solid waste, annually, through its 40 plus Energy-from-Waste (EfW) facilities. In total, these assets produce annual base load electricity to power more than a million homes. The company also has 20 material processing facilities.

Talking of its quarterly performance, it posted impressive results for first-quarter of 2021 and lifted its full-year guidance for adjusted EBITDA to the range of $460-$480 million from $435-$465 million. It improved free cash flow expectation from the range of $100-$140 million to $125-$155 million. Such expectation of a strong performance favors the company, making it an ideal choice to be acquired.

Motive Behind the Deal

Covanta Holding has a vision to provide sustainable waste management solutions to its customers and this deal will provide it with a new growth opportunity. Following the completion of the deal, the newly-formed entity will invest in organizational, operational and digital technology initiatives, improving Covanta Holding’s ability to provide sustainable solutions to the increasing waste challenges. The aim of the deal is to intensify the focus on sustainability and environmentally-friendly services, thus boosting shareholder value.

Zacks Rank & Price Performance

Shares of this presently Zacks Rank of 1 (Strong Buy) company have gained 105.5%, outperforming the industry’s rally of 14.7% in the past year.

One Year Price Performance

Zacks Investment Research
Image Source: Zacks Investment Research

Other Stocks to Consider

A few other top-ranked stocks in the same industry are Clearway Energy, Inc. (CWEN - Free Report) , NextEra Energy Partners, LP (NEP - Free Report) and Equinor ASA (EQNR - Free Report) , all flaunting the same Zacks Rank as Covanta Holding at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Clearway Energy’s 2021 earnings has moved 17.7% north in the past 60 days. The company’s long-term (three-five years) earnings growth rate is pegged at 25.66%.

NextEra Energy Partners’ long-term earnings growth rate stands at 18.44%. Its trailing four-quarter earnings surprise is 191.58%, on average.

Equinor ASA’s long-term earnings growth rate stands at 49.14%. Its trailing four-quarter earnings surprise is 37.83%, on average.

In-Depth Zacks Research for the Tickers Above

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NextEra Energy Partners, LP (NEP) - free report >>

Equinor ASA (EQNR) - free report >>

Clearway Energy, Inc. (CWEN) - free report >>