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Basch Report
Jax Daily Record Thursday, Oct. 29, 202005:10 AM EST

Advanced Disposal deal nears finish

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The Justice Department posted a list of divestitures for Waste Management to complete a buyout.
by: Mark Basch Contributing Writer

Eighteen months after signing the merger agreement, Waste Management Inc. finally knows what it needs to do to complete its $4.6 billion acquisition of Ponte Vedra-based Advanced Disposal Services Inc.

The U.S. Department of Justice last week issued a list of overlapping facilities that the company will need to divest for antitrust clearance, including some operations in the Northeast Florida market.

The Justice Department outlined the divestitures as part of a federal lawsuit filed Oct. 23 against the two companies.

While that sounds contentious, Waste Management seems to be on board.

The Houston-based company did not publicly announce a response to the lawsuit but said in an emailed statement: “We are pleased the process has advanced to this point. We await the Court’s entry of the stipulated order that will allow the parties to close.”

Waste Management is the largest U.S. waste services company with about 21% of the market, according to a recent report by Morgan Stanley analysts. Advanced Disposal ranks fourth with a 2% market share.

The companies knew they would have to divest some operations to get antitrust approval for the merger. They announced a deal in June to sell $835 million in assets from the merged company to GFL Environmental and hoped that would satisfy Justice Department officials.

However, last week’s lawsuit gave the companies an additional list of 15 landfills, 37 transfer stations, 29 hauling locations and more than 200 waste collection routes that must be sold to GFL.

The list includes an Advanced Disposal hauling facility at 7580 Philips Highway in Jacksonville.

The companies also must sell 10 Advanced Disposal commercial waste collection routes in Jacksonville and 12 Waste Management routes in St. Johns and Clay counties.

“Without divestitures, this merger would have harmed competition for essential waste collection and disposal services throughout the country,” Assistant Attorney General Makan Delrahim said in a news release.  

“By requiring WMI and ADS to divest numerous facilities and assets in ten states, we will ensure that businesses, municipalities, and towns continue to benefit from competition for these critical services,” he said.

Besides the U.S. Justice Department, Florida Attorney General Ashley Moody and four other state attorneys general joined as plaintiffs in the lawsuit against the companies.

“Through this multi-agency action, we will preserve competition in our state in the waste collection and disposal market,” Moody said in a news release.

The asset sales, which include operations in Marion and Citrus counties, bring GFL in as a new market competitor in the state and “establishes a foothold for GFL to compete across multiple Florida markets,” Moody’s office said in the release.

CSX stock hits record after earnings report

CSX Corp.’s stock jumped to a record high last week after CEO Jim Foote expressed optimism about freight trends during the Jacksonville-based railroad company’s earnings report.

CSX reported revenue rose 17% from the second quarter to the third quarter as freight volumes increased after the COVID-19-related business shutdowns, and Foote said early fourth-quarter trends show the rebound is continuing.

The company’s stock rose as much as $6.09 to $84.81 in early trading Oct. 22, after the late afternoon earnings report the previous day. The stock fell back to close at $81.73 that day.

Credit Suisse analyst Allison Landry maintained an “outperform” rating on CSX but increased her price target for the stock from $89 to $91 after the report.

“While the stock has traded at a discount to the group for some time, given the prevailing view that the PSR (precision scheduled railroading) cost-cutting efforts have largely begun to bottom out, we can see a scenario whereby investors start to re-consider the growth narrative; particularly as the broader rail volume environment continues to recover,” Landry said in a research note.

Wells Fargo analyst Allison Poliniak-Cusic raised her price target on the stock from $81 to $82 but maintained an “equal weight” rating.

“We remain on the sidelines near term given the ongoing macro uncertainty, but must give credit where credit is due given the solid operational performance in the quarter,” Poliniak-Cusic said in her note.

Ameris touts Southeast location

As Ameris Bancorp reported strong third-quarter earnings, CEO Palmer Proctor said the bank’s Southeastern location is a plus during the pandemic.

“As for COVID, all I can say is, is we are definitely fortunate to have such a strong presence in the Southeast. We opened about half our retail lobbies in the branches this third quarter with minimal disruption of operation,” Proctor said in the company’s Oct. 23 conference call with analysts.

“And our customers, like many others, have learned to embrace the digital channels and mobile banking and we continue to have several initiatives there underway just to make that a better experience all the way around for our customers on a remote digital perspective,” he said.

Ameris, which moved its executive offices from Jacksonville to Atlanta last year, has branches in Florida, Georgia, South Carolina and Alabama.

Proctor said Ameris has 161 branches after closing nine this month. It did not say which offices were shut.

Federal Deposit Insurance Corp. data showed Ameris with 176 branches as of June 30, including 21 in the Jacksonville market.

Ameris reported adjusted earnings of $1.69 a share, up from 98 cents in the third quarter of 2019.

Analyst upgrades Rayonier AM

Ahead of its third-quarter earnings report next week, RBC Capital Markets analyst Paul Quinn upgraded his rating on struggling Rayonier Advanced Materials Inc.

The Jacksonville-based maker of specialty cellulose products has recorded six straight quarterly losses. But Quinn sees some reason for optimism as he upgraded his rating from “sector perform” to “outperform” and raised his price target for the stock from $3.50 to $5.50.

“With lumber prices setting record levels during Q3, we expect that the business will generate improved free cash flow which can be used to reduce leverage. As the debt overhang clears up, we expect that more investors could become attracted to the Rayonier Advanced story,” Quinn said in his research note.

He also said a shutdown of a Florida specialty cellulose plant by competitor Georgia-Pacific could benefit Rayonier AM.

Dredging company opens Jacksonville regional office

Great Lakes Dredge & Dock Co. said last week it opened a “strategic regional office” in Jacksonville, where it has “long run major projects and expects to take on additional work.”

The company last month announced a second dredging contract worth up to $116.5 million from the U.S. Army Corps of Engineers for its work on the project to deepen the St. Johns River in Jacksonville. 

This follows a $210 million contract it received in 2018.

Great Lakes Dredge & Dock announced the new regional office in Jacksonville as it also said it is moving its corporate headquarters from Oak Brook, Illinois, to Houston.

“The relocation stems in part from changing industry dynamics as the dredging market has shifted from Northern Illinois and the Great Lakes to work along the Gulf Coast and in the northeast and southeast coastal regions,” the company said in a news release.

“The Jacksonville office will be serving a robust southeastern market, where the company has had key projects in every port and along the coastlines,” it said.

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