Republic Industries Inc., a fast-growing conglomerate run by multi-billionaire H. Wayne Huizenga, said Wednesday it is acquiring one of California’s largest waste management companies as part of an ambitious plan to expand its waste business throughout the West.
Taormina Industries Inc. has agreed to merge into Republic for about $250 million in stock. Brothers William and Vincent Taormina will receive 6.5 million shares and will operate the Anaheim company as a separate unit under its own name.
Taormina, with 1 million curbside customers in seven cities and processing operations for three dozen municipalities in Southern California, will become the West Coast headquarters for Republic’s solid-waste disposal operations.
The transaction is the third announced in the last three days by Republic, which purchased two auto dealers for its nationwide superstore of new and used cars. It also has an electronic security business.
And the ambitious Huizenga is hardly through.
Taormina will be the “cornerstone” of Republic’s push to acquire waste management operations throughout California and “in all the surrounding states,” said Michael Karsner, chief financial officer of the Fort Lauderdale company. “Taormina has the management team and company culture and infrastructure to grow our business,” he said.
Currently, Republic “doesn’t have much” in solid-waste operations west of Texas, Karsner said.
William Taormina said the merger has been in the works for about three months. He and his brother will become corporate officers and be part of a four-member executive board overseeing Republic’s entire waste management business. The brothers will concentrate on operations in the West.
“What attracted us to the deal was that we would not be losing control of our company and the way we do business,” Taormina said Wednesday. “My brother and I want to set the direction and see our vision for Taormina Industries manifested,” he said.
The merger, he said, is an “excellent way” for Taormina Industries to expand.
The acquisition is part of a continuing consolidation nationwide in the trash-hauling and recycling business. Smaller operations are struggling with slimmer profit margins, tougher regulations and greater costs.
“If I hadn’t started out nearly 40 years ago, there’s no way I could go into business today,” said Tom Trulis, owner of Solag Disposal Inc., a small, family-run hauler in San Juan Capistrano that has contracts with six cities. “Sooner or later, we’ll become a vanishing breed.”
As more companies are gobbled up by the giants, he said, there will be less competition, prices will rise and cities and counties will have fewer choices.
The Taormina purchase marks Huizenga’s major move into California, which is “a great waste market,” said Stephen D. Weinress of investment banker L.H. Friend, Weinress, Frankson & Presson Inc. in Irvine. With all the mergers and acquisitions, he said, “who knows who’s going to end up with the great desert landfills” that could hold the key to big profits.
The $100-million Taormina operation would boost Republic’s annual solid-waste revenue to $800 million. The deal is expected to close by the end of the month, and more acquisitions are likely this year, Karsner said.
Huizenga, who built Waste Management (now WMX Technologies Inc.) and Blockbuster Entertainment into Fortune 500 companies and sold them, typically has used Republic stock to make his acquisitions, and that worries some industry analysts.
“If people have the confidence to take paper with Huizenga, more power to him,” Weinress said. “He’s basically got his own currency.”
On Tuesday, Republic agreed to acquire Courtesy Auto Group in Orlando, Fla., for $30 million in stock, its eighth acquisition of a dealer group since late December. On Monday, it agreed to buy Wallace Automotive Group in southeast Florida for $55 million in stock.
Republic acquired Alamo Rent-A-Car in November and agreed last month to buy National Car Rental System. The price for both was about $3 billion in stock and assumed debt.
By the time all the pending deals close, the Taormina brothers will end up with 1.7% of Republic’s 375 million shares outstanding, a stake that will be reduced as more stock is issued to buy other companies.
Despite the dizzying number of deals, Weinress said, Huizenga is known for buying solid companies with good market share and earnings. And the waste industry is “a very good business if you control costs,” Weinress said.
The Taormina brothers built the company that their parents founded in 1949 into a major regional waste manager by going well beyond the simple trash hauling business. The company provides residents in seven cities--Anaheim, Brea, Garden Grove, Placentia, Villa Park, Yorba Linda and Colton--with three colored barrels to separate recyclables, yard waste and garbage.
Each is processed separately at the company’s huge Anaheim plant, where $150 million worth of machinery separates trash, mulches lawn clippings, starts the recycling process and transfers garbage to trucks heading for landfills.
The company also returns profits from recycling to the cities, either in the form of a check or in stable or lower hauling rates. “That’s what’s special about what we do,” Taormina said. Other companies have adopted that practice, he said.
In addition, the company processes waste from about three dozen cities in Los Angeles, Orange and San Bernardino counties.
The brothers’ late father, Cosmo, was one of Huizenga’s friends when the Florida entrepreneur first started out in business. Together, they helped to form an industry trade group.
Taormina said that in three months of negotiations, he became familiar with Huizenga’s latest effort, AutoNation USA, a superstore chain that promises to revolutionize the way cars are sold. Taormina found likenesses with his own company.
“We are to trash what AutoNation is to cars,” he said. “We each have a new way of doing things.”
Taormina also shares a love of sports with Huizenga, who owns professional football, baseball and hockey teams in Florida. Taormina was a major force in the “Save the Rams” effort to keep the football team in Anaheim.
Though the Rams moved to St. Louis, Taormina hopes Huizenga will help bring another professional sports team here. “Wayne doesn’t own a basketball team yet,” he noted.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Firms at a Glance
* Headquarters: Fort Lauderdale, Fla.
* Business: Diversified in waste hauling, electronic surveillance and auto retailing
* Chairman/CEO: H. Wayne Huizenga
* CEO/President: Steven R. Berrard
* Employees: 4,090
* Status: Public
* Exchange: Nasdaq
* 1996 net sales: $2.4 billion
TAORMINA INDUSTRIES INC.
* Headquarters: Anaheim
* Business: Waste hauling and recycling
* Founded: 1949 by Cosmo and Arlene Taormina; now operated by sons William and Vincent
* Chairman: David Ault
* President/CEO: Thomas Vogt
* Employees: 650
* Trash-hauling contracts: Seven cities, including six in Orange County, plus trash processing for about 35 cities in Orange, Los Angeles, San Bernardino counties.
* Status: Private
* Purchase price: $250 million in stock
Sources: Waste Age magazine, Bloomberg Business News, Taormina Industries Inc.
Money in Waste
In 1995, Republic Industries’ waste-hauling business ranked as the nation’s sixth largest. Its pending merger with Anaheim’s Taormina Industries will broaden its market share. Disposal firms operating in U.S. ranked by 1995 revenue, in millions:
1. WMX Technologies, Inc., Oak Brook, Ill.: $10,248
2. Browning Ferris Industries, Houston: $5,779
3. Laidlaw Inc., Burlington, Ont. Canada: $2,517
4. USA Waste Services, Dallas: $457
5. Norcal Waste Systems, San Francisco: $270
6. Republic Industries, Fort Lauderdale, Fla.: $260
14. Taormina Industries, Anaheim: $120
Sources: Waste Age magazine, Bloomberg Business News, Taormina Industries Inc.