Waste Management, Inc.
) recently inked a definitive agreement with private equity firm
Energy Capital Partners to divest its subsidiary Wheelabrator
Technologies Inc. for about $1.94 billion in cash. The transaction
is expected to close in the later half of the year, subject to the
mandatory closing conditions and regulatory approvals. Barclays PLC
) and private investment banking firm Centerview Partners served as
financial advisors on the transaction.
The strategic move is intended to concentrate more on the core
operations of Waste Management and reduce earnings volatility
related to electricity sales. With four independent power-producing
facilities, Wheelabrator has a combined electricity generating
capacity of 853 megawatts. In addition, Wheelabrator's portfolio
includes 17 waste-to-energy facilities, four ash monofill
landfills, three transfer stations and an ongoing development and
construction project in the U.K.
Although all these operating units helped Waste Management's
waste-to-energy business flourish and generated approximately $845
million in total revenue in 2013, they were deemed to be a misfit
to the long-term corporate objectives. Consequently, Waste
Management decided to offload the business in the best interests of
its shareholders. The company, however, will continue to supply
waste products to some of the facilities of Wheelabrator post-sale.
Waste Management intends to utilize the proceeds from the asset
sale to drive incremental shareholder value in a way that would
lead to earnings accretion in the long term. The company expects to
follow a combination of share repurchase activities and acquisition
of similar firms to judiciously use the sale proceeds.
Waste Management expects an earnings accretion of 2 cents per
share in 2015 if the proceeds are entirely utilized for share
repurchase activities. However, if the acquisition of potential
targets is found to yield better earnings accretion, the company
might pursue those opportunities instead.
Headquartered in Houston, TX, Waste Management provides collection,
transfer, recycling and resource recovery, as well as disposal
services to residential, commercial, industrial and municipal
customers in the U.S. The company aims to focus on improving
customer retention by consistently providing better services and
higher value solutions.
Waste Management currently has a Zacks Rank #3 (Hold). Other stocks
that look promising and are worth considering in the industry
include Clean Harbors, Inc. (
), which carries a Zacks Rank #2 (Buy) and US Ecology, Inc. (
) with a Zacks Rank #1 (Strong Buy).
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