J.P. Morgan - 09 June 2024
Cleanaway Waste Management Ltd
Waste Management Industry
Global M&A activity starting to ramp up
This week has seen elevated corporate activity in the North America wastemanagement industry, highlighted by the below:
• Waste Management (WM US) announced the acquisition of Stericycle (STRLUS) for US$7.6bn. The transaction implied a forward EBITDA multiple of~15x (~12x post-synergies). WM is covered by Stephanie Yee, and her reporton the transaction can be found here.
• GFL Environmental's (GFL US) share price has rallied materially (+17% vs.the S&P 500 over the past two days), with media reports (Bloomberg)suggesting the company is evaluating two buyout offers. Based on consensusexpectations, GFL currently trades on a forward EBITDA multiple of ~12.5x.
Stericycle is a market leader in medical waste in the U.S. (~60% market share) anddocument shredding (45%). We note that CWY's own Daniels business retains adominant position in the medical waste industry in Australia.
We expect CWY's asset base to attract corporate interest as the waste managementindustry in Australia continues to evolve and industry returns shift furtherdownstream as economics improve on the back of landfill levy increases andregulatory policy changes, and hence industry returns become more“infrastructure-like.˙ It is notable that infrastructure funds (Macquarie, Igneo, etc.)have become more active in the industry in recent years. We expect thisinvolvement to accelerate in the event of meaningful growth in the energy-from-waste industry in Australia, given the nature of the returns from these assets andthe level of gearing that would be viewed as palatable by an infrastructure fund vs.an equity investor in a listed waste management company.
(20min delay)