Advanced Disposal Services Inc. now has a seat with the big boys.
The Jacksonville, Fla.-based solid waste management company, just days after striking a deal with federal regulators to satisfy anti-trust concerns, completed its $1.91 billion takeover of Veolia ES Solid Waste Inc. of Milwaukee.
The deal vaults Advanced Disposal to the top of the list of privately owned garbage companies in the country, and the company becomes one of the biggest of its kind, period.
Advanced Disposal now has almost 2 million customers in the Midwest, South and Northeast with the purchase of Veolia ES Solid Waste and its merger with former sister company Interstate Waste Services Inc. of Basking Ridge, N.J.
Operations from all three companies, with anticipated revenue of about $1.4 billion annually, will fly under the Advanced Disposal banner and include more than 3,000 collection vehicles in 20 states.
While the long-awaited closing of the transaction took place Nov. 20, there still is a question of where the unified company's headquarters will be located. Spokeswoman Mary O'Brien indicated talks are in advanced stages with one municipality and there could be word by the end of November.
"We're busting at the seams here. It's truly a business negotiation at this point," she said.
Advanced Disposal previously indicated it was looking at staying in Jacksonville, using Veolia ES Solid Waste's site in Milwaukee or moving to Atlanta or Charlotte.
Meanwhile, the new, larger Advanced Disposal also agreed to sell off assets in New Jersey and Georgia in an agreement with the U.S. Department of Justice. That relatively short list includes one of the larger landfills in Georgia, the Taylor County landfill. Also to be sold off are three transfer stations in northern New Jersey, two transfer stations in Central Georgia and three commercial waste collection routes in the Macon, Ga., area, the Justice Department said.
The Taylor County landfill comes from the Veolia ES Solid Waste side of the deal and received an average of 2,000 tons per day in 2011, according to the Georgia Department of Environmental Protection. The site brought in about 541,000 tons of
waste in total last year.
As part of an agreement with the federal government, Advanced Disposal will sell off the River Street and Fulton Street transfer stations in Paterson and a transfer station in Totowa, all in New Jersey.
In Georgia, aside from the landfill, the company also will have to divest the Peach County transfer station in Mauk and the Upson County transfer station in Thomaston. And in the Macon area, the deal includes three small commercial waste collection routes. Whoever acquires those operations also will have the option to purchase hauling facilities in Byron and Thomaston, Ga., the Justice Department said.
The required divestitures are minimal considering the size of the nearly $2 billion deal.
Stock analyst Michael E. Hoffman is director of research at Wunderlich Securities Inc. and has covered the solid waste industry for years.
"The Georgia stuff makes more sense to me. I'm surprised there's not stuff in Pennsylvania," he said, that wasn't targeted for divestiture. "I really am."
That's because both Veolia ES Solid Waste and Interstate Waste, a sister company to Advanced Disposal, both have operations there, he said.
As is typical in these situations, the Justice Department filed suit in U.S. District Court in Washington, D.C., to require the divestitures while at the same time saying it has struck a settlement to resolve anti-trust concerns.
"Without the divestitures required by the department, consumers in northern New Jersey, central Georgia and the Macon metropolitan area would have been harmed by a reduction in competition for commercial solid waste collection or disposal," said Joseph Wayland, acting assistant attorney general in charge of the Department of Justice's Antitrust Division, in a statement.
The proposed federal settlement is actually with Star Atlantic Waste Holdings L.P., owner of both Advanced Disposal Services and Interstate Waste. Those two companies are being merged together with Veolia's solid waste operations in the deal that will create the new Advanced Disposal. Star Atlantic is operated by private equity firm Highstar Capital.
News of the proposed anti-trust settlement also provided updated revenue figures for both halves of the transaction. Veolia ES Solid Waste, which is being sold by its Paris-based parent company to help pay down debt, had annual revenue of approximately $818 million last year, the Justice Department said. Advanced Disposal Services and Interstate Waste combined for 2011 revenue of $563 million last year through Star Atlantic, the agency said.
To put the divestitures in perspective, Highstar indicated the combined company would have 47 landfills and 92 transfer stations when the deal was first announced this summer.
O'Brien said the company was not surprised by the federal government's divestiture requests. "We would love to be able to keep everything, but obviously it was not a shock to us, particularly in regard to the middle Georgia assets or the New Jersey assets. We will certainly comply as quickly as possible with the Department of Justice decree and move forward with divesting those," she said.