The consolidation of the waste-disposal industry quickened as Burr Ridge-based American Disposal Services Inc., a company that has acquired nearly 100 competitors in the past five years, became one of the hunted.
Allied Waste Industries Inc., the nation’s fifth-largest trash hauler, announced it had reached agreement to buy American in a deal valued at $890 million. It will become the nation’s third-largest waste company.
The deal came less than a month after USA Waste Services Inc. of Houston completed its acquisition of Waste Management Inc. and took the Oak Brook-based company’s name to become the largest garbage hauler in the country.
“I think long term it makes a lot of sense for Allied to acquire American,” said Melissa White, an analyst with Minneapolis-based Piper Jaffray Inc.
American and Allied have been on buying binges for the last several years. Only hours before Allied disclosed late Monday that it had reached a definitive agreement to buy American, the Scottsdale, Ariz.-based company announced it had completed the acquisition of Chicago-based Illinois Recycling Services Inc.
“Clearly, there are benefits to combining the two companies, including route consolidation, especially in Chicago.” White said.
Despite that prospect for cost saving, Mary Ryan, a spokeswoman for American, said, “For the most part, our employees are going to be fine. There is very little overlap of our regions and their regions.” Altogether, American employs 1,500 people.
One area that likely will be targeted is the 23-person headquarters at American. Even there, however, Ryan predicted, “reductions are going to be very minimal.”
Under the agreement, Allied will pay 1.65 shares of new stock for each share of American stock outstanding.
Based on Allied’s closing price Tuesday of $23.62 a share, Allied is paying the equivalent of $38.98 a share for American.
Investors didn’t embrace the deal. American shares fell 50 cents Tuesday to $37.62, while Allied shares dropped $2.87.
Allied’s acquisition also marks the re-entry into the Chicago waste-disposal market of Apollo Advisors and the Blackstone Group. Investment funds operated by the two are the largest shareholders of Allied. Earlier this year, Apollo and Blackstone backed an abortive bid to take over Elgin-based Safety-Kleen Corp.
They lost out after Laidlaw Environmental Services Inc., of Columbia, S.C., launched a hostile bid.
Though the waste-disposal business has been dominated by Waste Management and Browning Ferris Industries Inc., the nation’s second-largest waste hauler, it has remained a highly fragmented industry, with hundreds of small, local companies.
In Illinois, American’s operation includes four waste-transfer stations, a recycling processing facility, three collection hubs, in Chicago, Bloomington and Sullivan, and three landfills.
The combined companies will have 7,500 employees and annual revenues of $1.5 billion and will operate in 25 states.
