US/Europe Event-Driven Analyst

John DeMasi

Event-Driven

Advanced Disposal Services I / Event-Driven

On the evening of May 10, 2019, <a href="https://www.smartkarma.com/entities/26366" target="_blank" data-smartkarma-citation="entities:26366:1">Advanced Disposal Services I (ADSW US)</a> filed its draft merger proxy for the special shareholder meeting to vote on the acquisition of the Company by <a href="https://www.smartkarma.com/entities/2560" target="_blank" data-smartkarma-citation="entities:2560:1">Waste Management (WM US)</a>. The merger agreement required the draft merger proxy to be filed by May 13, 2019.
In this brief note I discuss new information revealed, including the background section, regulatory insights and analysis behind the fairness opinion.
This note is a follow up to my initial deal write-up - <a href="https://www.smartkarma.com/insights/waste-management-buying-advanced-disposal-services-a-rubbish-deal-or-cash-from-trash" target="_blank" data-smartkarma-citation="insights:29693">Waste Management Buying Advanced Disposal Services – A Rubbish Deal or Cash from Trash?</a> - published just two days ago before the draft merger proxy was filed with the SEC.

On the evening of May 10, 2019, Advanced Disposal Services I (ADSW US) filed its draft merger proxy for the special shareholder meeting to vote on the acquisition of the Company by Waste Management (WM US). The merger agreement required the draft merger proxy to be filed by May 13, 2019.
In this brief note I discuss new information revealed, including the background section, regulatory insights and analysis behind the fairness opinion.
This note is a follow up to my initial deal write-up - Waste Management Buying Advanced Disposal Services – A Rubbish Deal or Cash from Trash? - published just two days ago before the draft merger proxy was filed with the SEC.

Advanced Disposal Services/Waste Management – Draft Merger Proxy Filing Details

<a href="https://www.smartkarma.com/entities/2560" target="_blank" data-smartkarma-citation="entities:2560:1">Waste Management (WM US)</a>, an active acquirer founded by the late American businessman and entrepreneur Wayne Huizenga (who also founded Auto Nation, and acquired Blockbuster Video when it was a chain of just a few stores and grew it into a behemoth), <a href="http://s2.q4cdn.com/222406865/files/doc_news/2019/04/News-Release-Waste-Management-to-Acquire-Advanced-Disposal-for-%244.9-Billion-041519-Final.pdf" target="_blank">announced</a> on April 15, 2019, a definitive agreement to acquire <a href="https://www.smartkarma.com/entities/26366" target="_blank" data-smartkarma-citation="entities:26366:1">Advanced Disposal Services I (ADSW US)</a> for $4.9 billion ($3 billion equity value plus assumption of $1.9 billion of net debt) in a deal structured as a cash merger. The deal price is $33.15 cash per share of ADSW, which represents a 22.1% premium to ADSW’s closing price on Friday, April 12, 2019, and a 20.9% premium to its 30 days VWAP.
With ADSW now trading $.85 below the deal price, investors can earn a gross 2.6% spread (the Company does not pay a dividend). The companies expect the deal to be completed by the first quarter of 2020, meaning a second request under the U.S. antitrust review process is a virtual certainty. So on first blush, the spread looks quite tight for a deal that can take up to 11 months (WM actually said on their Q1 19 earnings call they expect the deal to take 10 -12 months to complete) so the annualized rate of return looks to be in the 3.0% - 3.4% range, assuming a closing date of mid February 2020 to mid/late March 2020.
Could there be a logical reason for ADSW's tight spread, such as the prospect of a competing bidder? In this piece I dumpster-dive into the deal details and explore whether investors should buy it or bin it.

Waste Management (WM US), an active acquirer founded by the late American businessman and entrepreneur Wayne Huizenga (who also founded Auto Nation, and acquired Blockbuster Video when it was a chain of just a few stores and grew it into a behemoth), announced on April 15, 2019, a definitive agreement to acquire Advanced Disposal Services I (ADSW US) for $4.9 billion ($3 billion equity value plus assumption of $1.9 billion of net debt) in a deal structured as a cash merger. The deal price is $33.15 cash per share of ADSW, which represents a 22.1% premium to ADSW’s closing price on Friday, April 12, 2019, and a 20.9% premium to its 30 days VWAP.
With ADSW now trading $.85 below the deal price, investors can earn a gross 2.6% spread (the Company does not pay a dividend). The companies expect the deal to be completed by the first quarter of 2020, meaning a second request under the U.S. antitrust review process is a virtual certainty. So on first blush, the spread looks quite tight for a deal that can take up to 11 months (WM actually said on their Q1 19 earnings call they expect the deal to take 10 -12 months to complete) so the annualized rate of return looks to be in the 3.0% - 3.4% range, assuming a closing date of mid February 2020 to mid/late March 2020.
Could there be a logical reason for ADSW's tight spread, such as the prospect of a competing bidder? In this piece I dumpster-dive into the deal details and explore whether investors should buy it or bin it.

Waste Management Buying Advanced Disposal Services – A Rubbish Deal or Cash from Trash?

United States

Covanta Holding Corporation conducts operations in waste disposal, energy services, and specialty insurance.  The Company also owns and operates waste-to-energy and power generation projects.  Covanta's waste-to-energy facilities convert municipal solid waste into renewable energy for communities primarily in the United States.

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Covanta Holding (CVA US)

Advanced Disposal Services/Waste Management – Draft Merger Proxy Filing Details

On the evening of May 10, 2019, Advanced Disposal Services I (ADSW US) filed its draft merger proxy for the special shareholder meeting to vote on...

John DeMasi

Waste Management Buying Advanced Disposal Services – A Rubbish Deal or Cash from Trash?

Waste Management (WM US), an active acquirer founded by the late American businessman and entrepreneur Wayne Huizenga (who also founded Auto...

John DeMasi

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