What You Should Know:
– Waste Management, Inc. (NYSE: WM) and Stericycle (NASDAQ: SRCL) announced today a definitive agreement for WM to acquire Stericycle for $62.00 per share in cash.
– This translates to a total enterprise value of approximately $7.2B, including Stericycle’s net debt of $1.4B. The offer represents a 24% premium over Stericycle’s 60-day volume-weighted average stock price before a potential sale was reported publicly.
Stericycle: A Leading Player in Medical Waste and Information Destruction
Stericycle is a major provider of regulated medical waste and compliance services, along with secure information destruction services. This acquisition strengthens WM’s environmental service offerings by adding a prominent platform with differentiated assets in these growing sectors.
Strategic and Financial Benefits of the Acquisition
This acquisition aligns with WM’s strategic goals, sustainability initiatives, and financial objectives. Here’s a breakdown of the key benefits:
- Expands WM’s Environmental Service Offerings: WM gains a leading medical waste and secure information destruction platform, complementing their existing environmental solutions. The healthcare industry’s projected growth suggests this business will outperform even WM’s core solid waste business.
- Strengthens Commitment to Sustainability: WM furthers its investment in recycling infrastructure across North America and leverages Stericycle’s expertise in secure information destruction to enhance environmental value.
- Creates a Comprehensive Service Provider: The combined entity offers a wider range of services, allowing customers to partner with a single provider for diverse waste management needs. Stericycle’s expertise in healthcare and secure information destruction strengthens WM’s position in these sectors.
- Significant Cost Synergies and Increased Earnings: WM expects to generate over $125 million in annual run-rate synergies. These savings stem from WM’s logistics expertise, technology-driven cost optimization, and extensive disposal network. The acquisition is projected to be accretive to WM’s earnings and cash flow within a year of closing.
- Supports WM’s Capital Allocation Strategy: WM’s strong financial position allows for acquisition funding. The company will continue to prioritize investments in recycling & renewable energy businesses, base business capital expenditures, dividend payments, and strategic acquisitions. Stericycle is expected to enhance WM’s cash flow growth and support shareholder returns. WM anticipates returning to normal share repurchases within 18 months of closing.
Financing and Closing
The acquisition is not subject to a financing condition. WM plans to utilize a combination of bank debt and senior notes to finance the deal. While WM’s net debt-to-EBITDA ratio will increase to approximately 3.4x in the short term, the company is committed to maintaining a strong balance sheet and investment-grade credit rating. Through prudent capital allocation, including a temporary suspension of share repurchases, WM expects to achieve its targeted leverage ratio within 18 months of closing.
“Our sustained focus and commitment to transforming our business over the past five years has uniquely positioned Stericycle for this transaction, which creates significant value for shareholders, unlocks new opportunities to deliver diversified services to customers, and supports investment in the growth and development of our team members,” said Cindy J. Miller, Stericycle’s President and Chief Executive Officer. “As customers seek to manage a greater volume and variety of materials in a safe, responsible, and sustainable way, Stericycle’s knowledge and expertise in regulated medical waste and secure information destruction are compelling additions to WM’s broad portfolio of environmental solutions. We are proud of all that we’ve accomplished to shape a healthier and safer world and look forward to our future as part of WM.”
