Progressive Waste is scooping up Choice Environmental Services Inc. from Swisher in a $123.3 million deal that will help it build route density.
Swisher Hygiene's decision marks its relatively quick exit from the trash business. It entered the market in early 2011 with big plans to integrate garbage services with its broader sanitation and hygiene offerings for businesses.
But things started moving sideways for Swisher not long after taking control of Choice Environmental, and the company finally decided to sell the operation instead of staying in the capital-intensive rubbish business.
For Vaughan, Ontario-based Progressive Waste, the acquisition of Choice Environmental will allow the company to add density and increase productivity on collection routes and push more trash to its J.E.D. landfill near Orlando.
"There's a potential for significant internalization," said Michael E. Hoffman, a stock analyst for Wunderlich Securities Inc. who covers Progressive Waste.
Swisher Hygiene's move to exit the trash business comes as the company has some heavy hitters on the company's board, including arguably the industry's biggest name in history, H. Wayne Huizenga. The billionaire is best known for his work with Waste Management Inc. and then later Republic Services Inc., now the two largest trash companies in the country.
"These assets, the Choice assets, fit very nicely with our existing operations and lend themselves very well to our strategy of building more dense collection routes and raising our internalization levels at our landfill in the area," said Chaya Cooperberg, a spokeswoman for Progressive Waste.
Choice Environmental, of Fort Lauderdale, Fla., has more than 150,000 residential and 7,500 commercial customers in Southeastern, Southwestern and Central Florida. The company operates six hauling operations and three transfer and material recovery facilities.
Swisher Hygiene's CEO, Thomas Byrne, said the company was pleased with the Choice Environmental operations.
"However, during this period we determined that we could provide our customers with the same benefits through a less capital-intensive, more cost-effective approach by partnering with other service providers to cross-sell waste services on a national scale," he said in a statement.
Choice Environmental brings an additional $72 million in annual revenue to Progressive Waste.
Hoffman said that while the purchase price might seem higher on the surface, Progressive Waste will be able to save money by integrating new and existing collection and administrative operations and pushing more waste to the J.E.D. landfill. Choice Environmental's mix also is weighted toward higher-margin commercial work.
"This is a good deal. It will be accretive to earnings next year," he said.
Progressive Waste has been bulking up in Florida since its 2010 acquisition of Waste Services Inc.
"What you've seen us do is not enter into new markets there necessarily but tuck into our existing assets in the region and the acquisition of Choice is very much in line with that strategy of adding assets to our existing marketing footprint there," Cooperberg said.
The purchase price could increase by $1.75 million if certain revenue targets are met. Ten percent of the purchase price also is being held back and could be adjusted based on the delivery of audited financial statements to Progressive Waste.