Western Waste to Be Bought by USA Waste : Mergers: The deal to purchase the Torrance company for $525 million is part of an industry trend toward consolidation.
Western Waste Industries, a Torrance-based solid waste service company, announced Tuesday that it will be acquired by USA Waste Services for $525 million in a deal that would create the third-largest trash collection and disposal company in North America.
The stock swap, which amounts to $27 a share for Western Waste stockholders, would allow Dallas-based USA Waste to expand into key California markets.
Western Waste, which provides solid waste collection services to more than 63,000 commercial and industrial customers, has a regional stronghold in California. Collection, landfill and transfer operations in the state amounted to 68% of its revenue in 1994. The company also has operations in Texas, Florida, Arkansas, Louisiana and Colorado.
Analysts said the deal, expected to be approved by stockholders in the spring, is part of a broader industry consolidation being driven by tougher environmental regulations, rising landfill costs and the decreasing number of municipalities collecting recycled materials. Smaller waste companies such as Western Waste find it tougher to compete as landfills become costlier to run. They are also have a tougher time managing entire cities’ recycling programs.
“The little guys are being bought out as landfill prices go up,” said Stacy Burch, an analyst with First Analysis, an investment consulting firm in Chicago. That, along with the changes in recycling, “means the consolidation trend in the waste industry will continue in the year to come.”
USA Waste said it expects to derive savings from combining operations and reducing administrative and staffing costs. But USA Waste spokesman Lew Nevins said there will be no job reductions in California.
The combined companies would have 61 collection operations, 35 landfills, 24 transfer stations and five recycling operations. They would serve a million people in 23 states.
After the merger, USA Waste revenue would grow to $800 million, putting it behind industry leaders WMX Technologies Inc. (formerly Waste Management Inc.) and Browning-Ferris Industries Inc.
Western Waste stockholders would receive 1.5 shares of USA Waste common stock for each of their shares. USA Waste currently owns 4.5% of Western Waste’s outstanding shares.
The value of the stock swap is about $450 million. USA Waste would also assume about $75 million in Western Waste debt, bringing the total value of the deal to about $525 million, USA Waste said.
Rumors of the takeover began circulating Dec. 12 when Western Waste shares rocketed $4.50 to close at $23.25. Western Waste shares on Tuesday surged $1.625 to close at $26, and USA Waste fell 75 cents to $18.125 on the New York Stock Exchange.
Kosti Shirvanian, Western Waste chairman and its largest shareholder, would become vice chairman of USA Waste. John E. Drury would retain his position as chief executive of USA Waste.
