Waste Management to Acquire Stericycle for $62.00/Share in Cash, A 20% Premium Elevates Stericycle (SRCL) Shares
In a notable development in the industrial and environmental service sector, Stericycle, Inc. (NASDAQ: SRCL) is set to be acquired by Waste Management Inc. (NYSE: WM) in a significant deal valued at approximately $7.2 billion, debt included. This strategic move has catapulted Stericycle shares into a bullish trend, driven by the promising terms of the acquisition agreement.
Stericycle has carved a niche for itself with its specialized services in the collection and disposal of hazardous medical waste, alongside operating a notable document shredding service, Shred-It. The acquisition deal stipulates a per-share cash payout of $62.00, showcasing a premium of 24% to Stericycle’s 60-day volume-weighted average price leading up to May 23, 2024. Not only does this offer a direct premium of 20% to Stericycle’s preceding close at $51.54, but it also signifies a strategic expansion for Waste Management.
The boards of directors of both companies have given their unanimous nod to the arrangement, setting the stage for a completion as early as the fourth quarter of 2024, contingent upon meeting customary closing conditions.
Jim Fish, President and CEO of Waste Management, expressed enthusiasm about the acquisition: “The acquisition of Stericycle is a significant step in advancing this commitment because it broadens the scope of our service offerings, bringing together the leader in solid waste and a premier company in regulated medical waste services.”
Financial and Strategic Advances
The merger is not only strategic from a services expansion viewpoint but also promises financial benefits. Waste Management anticipates over $125 million in annual run-rate synergies and expects the deal to be accretive to earnings and cash flows within the first year following the closure. Post-acquisition, a net debt-to-EBITDA ratio of about 3.4x is expected, aiming to realign down to a 2.75x to 3.0x range within 18 months post-closure.
Both companies have voiced confidence in maintaining their operational strength and are set to meet the previously announced full-year guidance, discounting any transaction-associated expenses.
Waste Management plans to fund this significant acquisition through a mix of bank debt and senior notes. By the close of March, Waste Management reported cash and equivalents of $322 million, putting it in a comfortable position to proceed with this strategic buyout.
The last 12 months have seen Waste Management’s stock market performance ascend by over 25%. Investors interested in tapping into this upward trajectory could consider exposure through related ETFs like the IShares U.S. Utilities ETF (IDU) and TCW Transform Systems ETF (NETZ).
Market Reactions and Expectations
The announcement of this acquisition deal has led to notable price action, with Stericycle shares experiencing a 15% uptick, last trading at $59.27. This positive market reaction underscores the perceived value and strategic fit that the deal brings to both companies and their stakeholders.
As the two companies navigate towards finalizing this acquisition, the industry watches closely, anticipating the broader implications for service offerings and financial growth in the solid and medical waste management sector. This merger marks not only a significant financial transaction but also a promising move towards greater service diversification and environmental stewardship in waste management.
