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Stericycle, Inc. (NASDAQ:SRCL) shares are trading higher after the company inked a deal to be acquired by Waste Management Inc. (NYSE:WM) for approximately $7.2 billion, including debt.
Stericycle focuses on the collection and disposal of hazardous medical waste and also operates a document shredding service known as Shred-It.
As per the terms, the per-share cash acquisition price is $62.00, which represents a premium of 24% to Stericycle’s 60-day volume-weighted average price as of May 23, 2024 (the last trading day before an article reported that Stericycle was considering a potential sale). The acquisition price represents a premium of 20% to SRCL’s previous closing price of $51.54.
The deal is unanimously approved by the boards of directors of both companies and is expected to close as early as the fourth quarter of 2024, subject to customary closing conditions.
Jim Fish, President and Chief Executive Officer of Waste Management, said, “The acquisition of Stericycle is a significant step in advancing this commitment because it broadens the scope of our service offerings, bringing together the leader in solid waste and a premier company in regulated medical waste services.”
Financial Benefits: Waste Management expects the deal to generate annual run-rate synergies of over $125 million and be accretive to earnings and cash flows within one year of closing.
In the near term, post-buyout completion, Waste Management expects to achieve a net debt-to-EBITDA ratio of approximately 3.4x and a leverage ratio within its targeted net debt-to-EBITDA range of 2.75x to 3.0x approximately 18 months after closing the transaction.
Both companies remain confident in the strength of their businesses and expect to achieve previously announced full-year guidance, excluding the impacts of any transaction-related costs.
Waste Management intends to finance the transaction using a combination of bank debt and senior notes. As of March-end, WM’s cash and equivalents stood at $322 million.
Waste Management stock has gained more than 25% in the last 12 months. Investors can gain exposure to the stock via IShares U.S. Utilities ETF (NYSE:IDU) and TCW Transform Systems ETF (NYSE:NETZ).
Also Read: Waste Management Mulls $3B Sale Of RNG Business: Report
Price Action: SRCL shares are up 15% at $59.27 at the last check Monday.
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