Fourteen months after signing the deal, Advanced Disposal Services Inc. last week agreed to a lower buyout price from Waste Management Inc.
The two waste services companies said Waste Management now will pay $30.30 per Advanced Disposal share to buy the Ponte Vedra-based company.
The companies had agreed to a $33.15 per-share price in April 2019.
The new agreement lowers the total value of the deal from $4.9 billion to $4.6 billion.
The companies had expected a lengthy merger process because of antitrust issues that needed to be resolved, and the COVID-19 pandemic slowed the process even more.
The deal now is targeted for completion at the end of the third quarter.
As they announced the lower price, the companies also announced a deal to sell some assets to GFL Environmental Inc. for $835 million, which they hope will satisfy U.S. Justice Department antitrust concerns.
“We believe the revised agreement with Waste Management, coupled with our joint agreement to sell substantially all of the divestitures to GFL Environmental, delivers significant value and certainty of closing to Advanced Disposal stockholders,” Advanced Disposal CEO Richard Burke said in a news release.
“We continue to work hand in hand with the Waste Management team, GFL Environmental, and the U.S. Department of Justice to gain regulatory clearance and complete the transaction,” he said.
Advanced Disposal shareholders approved the original agreement in June 2019, and a special meeting will need to be scheduled for shareholders to vote on the lower price. No date has been set for that meeting.
A lot has happened since the original agreement was approved, including pandemic-related turmoil in the stock market.
Advanced Disposal’s stock price remained trading close to $33 when the market collapsed in late February, indicating Wall Street expected the merger price to hold up.
However, as the process dragged on, the price fell below $32 in late May, showing doubts were creeping in.
The stock fell 99 cents to $30.17 on June 24 after the revised deal was announced.
“We believe a ‘re-cut’ of the deal was long anticipated, particularly given that Advanced Disposal’s stock price had meandered down from its prior takeout price as the market felt like it was clearly anticipating an event like this to take place, in our view,” Raymond James analyst Patrick Tyler Brown said in a research report last week.
“While we stress the deal has not yet been cleared by regulatory bodies and Advanced Disposal shareholders still must approve the deal, we do feel there’s a high likelihood Waste Management will be able to (finally) cross the finish line,” he said.
Waste Management and Advanced Disposal did not announce specific assets that will be divested, but Canada-based GFL said the deal consists of operations in 10 states that are expected to generate $345 million in annual revenue.
“While the $345 million of divestitures were even higher than we originally anticipated (we felt it could be $200-300 million), in our view, re-cutting the price and having a bidder in tow for the divested assets (GFL) reduces risk around Waste Management being able to close this deal and should incrementally quell speculation around ‘what if’ scenarios,” Brown said.
“Given the bevy of developments over the past 14 months including languishing Advanced Disposal results, the largest pandemic in 100 years driving unprecedented dynamics across the garbage space, and materially more divestitures required than originally anticipated, we view the ‘re-cut’ deal as a win-win-win to all parties involved (Waste Management, GFL and Advanced Disposal),” he said.