Shares of Advanced Disposal (NYSE:ADSW), the fourth-largest nonhazardous solid waste management company in the U.S. by revenue, jumped over 21% Monday morning after it was announced the company would be acquired by Waste Management. (NYSE:WM).
The two companies announced today they'd entered into a definitive agreement calling for a subsidiary of Waste Management to acquire all outstanding shares of Advanced Disposal for $33.15 per share in cash, worth a total enterprise value of $4.9 billion when roughly $1.9 billion of Advanced Disposal's net debt is included. The agreed price per share is roughly a 22% premium to Advanced Disposal's Friday closing price.
"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," said Jim Fish, president and chief executive officer of Waste Management, in a press release.
At first glance this appears to be a solid move for Waste Management, as it grows the company's footprint and allows Waste Management to deliver Advanced Disposal customers with additional access to additional sustainable waste management and recycling services. In terms of financial implications, the acquisition aligns with Waste Management's growth strategy, including growing earnings per share, cash flow, and margins. Acquiring Advanced Disposal will add a complementary asset network and customer base, and management expects to generate more than $100 million in annual cost and capital expenditure synergies. Even better, the acquisition will be immediately accretive to Waste Management's adjusted earnings per share and cash flow. The acquisition seems to be a solid addition to Waste Management's business, and the premium valuation was a nice boost for Advanced Disposal shareholders -- it's a good move, and it's not surprising that both stocks are trading higher Monday morning.