Waste Management, Inc. (WM - Free Report) and Advanced Disposal Services, Inc. (ADSW - Free Report) yesterday announced revision of terms of the definitive agreement per which all outstanding shares of the latter will be purchased in cash by a subsidiary of Waste Management.
Notably, shares of Waste Management have gained 3.7% over the past three months, compared with the 7.1% decline of Advanced Disposal shares and 8.4% decline of the industry both belong to.
Still a Multibillion Dollar Deal
The revised value of the deal is $30.3 per share, representing total enterprise value of $4.6 billion, including around $1.8 billion of Advanced Disposal’s net debt. The deal’s previous value, when announced on Apr 15, was $33.15 per share, representing total enterprise value of $4.9 billion including around $1.9 billion of Advanced Disposal’s net debt.
Waste Management plans to fund the acquisition through a combination of credit facilities and commercial paper, and is checking other long-term financing modes as well.
It is one of the largest solid-waste company acquisitions and Waste Management’s largest acquisition in more than a decade.
Additionally, Waste Management and Advanced Disposal announced a definitive agreement per which GFL Environment (GFL - Free Report) will purchase a combination of their assets for $835 million in order to satisfy all of the divestitures expected to be required by the U.S. Department of Justice. Both the transactions are anticipated to be completed by the third quarter of 2020.
Benefits to Waste Management
The company continues to expect more than $100 million in annual cost savings and capital expenditure synergies, and significant cash flow growth from the transaction.
The acquisition will add complementary assets and customer base, helping Waste management strengthen its footprint in North America.
While Waste Management and GFL Environment carry a Zacks Rank 3 (Hold), Advanced Disposal holds a Zacks Rank #2. Another Zacks #2 Ranked stock in the broader Zacks Business Services sector is Elastic N.V. (ESTC - Free Report) . You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here. Long-term earnings (three to five years) growth rate for Elastic N.V. is estimated at 26%.
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