Waste Connections, Inc.
) is strengthening its oilfield waste business by buying R360
Environmental Solutions, Inc. -- a leading provider of
non-hazardous oilfield waste management -- and its subsidiaries for
roughly $1.3 billion in cash. The acquisition is expected to
consummate in the fourth quarter of 2012.
WASTE CONNCTION (WCN): Free Stock Analysis
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R360 Environmental Solutions provides non-hazardous oilfield waste
management services to the natural resource producing areas in the
U.S. The deal will provide Waste Connections with 26 facilities
across the U.S. Further, it will add oilfield waste management
services in the Permian, Bakken and Eagle Ford Basins.
Management expects the acquisition to add more than 400 basis
points to the company's consolidated earnings before interest,
taxes, depreciation and amortization, driven by the higher margin
and disposal oriented activities of R360 Environmental Solutions.
With the acquisition, the Exploration and Production (E&P)
disposal activities of Waste Connections are expected to expand.
Therefore, the company will have access to several new
unconventional sites where R360 Environmental Solutions has
increased drilling activities.
Earlier, in March 2012, Waste Connections completed the acquisition
of the operations of Alaska Pacific Environmental Services
Anchorage, LLC and Alaska Green Waste Solutions, LLC (Alaska
The acquisitions are in line with the strategy of Waste Connections
which intends to expand its operations in potential, yet unexplored
markets. Further, it augments the company's product portfolio
within the solid waste industry.
Waste Connections reported second-quarter 2012 adjusted earnings of
36 cents, in line with the Zacks Consensus Estimate. Revenues
increased 5.3% to $410.7 million from $390.2 million in the
year-ago quarter, matching the Zacks Consensus Estimate.
However, declines in recycling commodity values and increasing fuel
prices may weigh on margins moving forward. Moreover, recent
slowdown in the economy has also negatively affected municipal
solid waste (MSW) volumes.
Based in Folsom, California, Waste Connections is an integrated
solid waste services company that provides solid waste collection,
transfer, disposal and recycling services in mostly secondary
markets. The Company operates in 29 states and also provides
intermodal services for the movement of containers in the Pacific
Waste Connections retains a short-term Zacks #3 Rank (Hold). We
have a long-term Neutral recommendation on the stock.