US Ecology to Buy Michigan Firm - Analyst Blog

Leading waste management company US Ecology, Inc. ECOL recently inked a definitive agreement to acquire Wayne, MI-based fully-integrated environmental services and waste management firm The Environmental Quality Company for $465 million. The acquisition, likely to be completed by the third quarter of 2014, is expected to be accretive to adjusted earnings per share immediately.

The Acquiree

The Environmental Quality Company offers a comprehensive package of environmental services including treatment and disposal of hazardous wastes, recycling, field and industrial services and total waste management services. With a dedicated employee base of 1,250 servicing over 6,000 active customers, the company has created a niche market for itself in the waste management industry.

The company's facilities include a hazardous waste permitted landfill on the outskirts of Detroit, MI, 13 waste treatment and recycling facilities and 21 dedicated service centers. For the year ended Dec 31, 2013, The Environmental Quality Company generated pro forma revenue of approximately $376 million and adjusted pro forma EBITDA of approximately $54 million.

The Synergies

With The Environmental Quality Company on board, US Ecology will be able to extend its geographic footprint and serve a larger pool of customers. In addition, the strategic purchase will enable it to broaden its environmental services platform with complementary assets, adhering strictly to environmental, health, and safety norms.

The combination of the two companies will further result in cross-selling opportunities and will lead to economies of scale with similar operating culture. The acquisition is likely to offer solid long-term growth opportunities, delivering compelling value to customers and stockholders alike.

The Funding

The transaction will be funded using a combination of cash on hand and committed debt facilities. US Ecology has a new $540 million credit facility on it cards, comprising a 7-year term loan of approximately $415 million and a $125 million 5-year revolving credit facility.

Moving Forward

The acquisition is likely to create a premier North American environmental services company. Headquartered in Boise, ID, US Ecology is one of the oldest radioactive and hazardous waste services companies in North America. The company offers radioactive, hazardous, and non-hazardous industrial waste management and recycling services to commercial and government entities, such as refineries and chemical production facilities, manufacturers, electric utilities, steel mills, medical and academic institutions and waste brokers.

US Ecology presently has a Zacks Rank #1 (Strong Buy). Companies in the industry that are worth reckoning include Dow Chemical DOW, Huntsman Corp. HUN and Stericycle, Inc. SRCL, each carrying a Zacks Rank #2 (Buy).