Waste Management WM-N said on Monday it will take Stericycle SRCL-Q private in a deal valued at $7.2-billion, as it looks to tap into the growing healthcare waste disposal market in the United States.
Shares of Stericycle jumped nearly 15 per cent in early trade on Waste Management’s $62 per share offer, which represents an equity value of $5.75-billion for Stericycle and an about 20 per cent premium to the stock’s Friday close.
Garbage disposal firms are riding a steady wave of demand spurred by an uptick in urbanization and industrialization.
The North America waste management market size is expected to rise to $229.3-billion by 2027 from $208.0-billion in 2019, according to a data analysis from Allied Market Research.
WM, which dominates the garbage collection space in the United States, is looking to widen its horizons with Stericycle that helps clinics, surgery centers and hospitals dispose of their biohazardous and pharmaceutical waste.
Analysts at Oppenheimer expect Stericycle’s assets to be an “appealing” addition to WM, given the latter’s limited footprint in the healthcare industry.
The Waste Management-Stericycle deal, expected to close by the fourth quarter of the year, will generate more than $125-million in annual cost cuts, and be accretive to WM’s earnings and cash flows within one year of its close.
In May, Reuters reported that WM, which collects trash and recycles it into clean, renewable energy, was also exploring a sale of its renewable natural gas business that could be worth about $3-billion, citing people familiar with the matter.
Shares on WM, which recently signed a sustainability partnership with Major League Baseball, fell about 2 per cent on Monday, but have risen nearly 18 per cent this year.
The company beat analysts’ estimates for first-quarter profit in April, aided by higher prices and steady demand.
Centerview Partners LLC served as WM’s financial adviser, while Vinson & Elkins L.L.P and Baker Botts L.L.P served as its legal counsel.