Are Shareholders Getting Enough in the Advanced Disposal Buyout?

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Advanced Disposal Services Inc. (NYSE: ADSW) shares made a sizable gain to kick off the week on what is being called one of the biggest solid-waste company acquisitions in more than a decade. Waste Management Inc. (NYSE: WM) is acquiring this firm for nearly $3 billion.

Under the terms of the agreement, Waste Management will acquire all outstanding shares of Advanced Disposal for $33.15 per share in cash, representing a total enterprise value of $4.9 billion when including approximately $1.9 billion of Advanced Disposal’s net debt.

The per-share price represents premiums of 22.3% and 27.7% from the 50-day and 200-day moving averages of $27.11 and $25.95, respectively.

This acquisition grows Waste Management’s footprint and allows it to deliver to Advanced Disposal customers unparalleled access to differentiated, sustainable waste management and recycling services.

With 2018 revenues of $1.56 billion, adjusted EBITDA of $427 million and approximately 6,000 employees, Advanced Disposal will be adding its portfolio of more than 3 million residential, commercial and industrial customers of Waste Management. Advanced Disposal’s solid waste network includes 94 collection operations, 73 transfer stations, 41 landfills and 22 owned or operated recycling facilities.

Jim Fish, president and CEO of Waste Management, commented:

At Waste Management, we focus on creating value for all stakeholders, delivering on our commitments to employees, customers, community partners, shareholders and the environment. The acquisition of Advanced Disposal extends these commitments by adding complementary assets and operations as well as a team with a shared focus on safety, outstanding service and operational excellence. With this acquisition, we will grow our asset footprint to serve more customers and communities and generate significant growth and value creation opportunities for Waste Management’s shareholders and our combined company’s employee base.

The transaction, which was unanimously approved by the boards of directors of both companies, is expected to close by the first quarter of 2020.

Shares of Waste Management were last seen up about 3% at $104.61, in a 52-week range of $79.96 to $105.68. The consensus price target is $107.90.

Advanced Disposal Services was last seen up about 20% at $32.51 a share. The stock consensus price target is $29.33, and the 52-week trading range is $21.80 to $32.63.

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