Credit Suisse Says Waste Connections, Republic Services Most Likely Acquirers Of Progressive Waste

• A few days ago, Progressive Waste Solutions Ltd (USA) BIN announced a review of strategic alternatives.
• Many believe that this basically means that the company is looking into a sale as its profits continue to fall on rising costs. However, this is not the only option.
• In a report issued Friday, Credit Suisse analyst Andrew E. Buscaglia shared a look at a few possible scenarios and their likelihood.

On Friday, Credit Suisse analyst Andrew E. Buscaglia reiterated an Underperform rating and $21.00 price target on shares of Progressive Waste Solutions. After the company announced it was reviewing “strategic alternatives,” the expert shared his view on the issue, and four possible scenarios he envisioned.

1) If Progressive Waste Solutions puts itself up for sale, the firm believes the most likely buyers are Waste Connections, Inc. WCN and Republic Services, Inc. RSG. “Exposure in Canada would help each company from a tax perspective as neither has ops outside the US. Of the two, WCN's strategy of focusing on secondary markets may best position it to do M&A from a legal standpoint given regulatory hurdles (i.e. anti-trust),” the report explicated. If the company is acquired, Credit Suisse expects a valuation of ~$30-$31, which would imply a 25 percent premium to current levels.

Related Link: Analysts Split On Progressive Waste's Strategic Review

2) If the company announces a breakup, the analysts think the Canada segment could fit with both Waste Connections or Republic Services, while “pieces of the West/East segments could suit all three companies and/or private equity.”

3) Progressive Waste Solutions could make a large acquisition to solve its financial issues.

4) In spite of the ongoing review, there is now way to know if the result will be a change in strategy or a transaction – it could be neither one. “If something is announced, all of these scenarios would come with a great deal of execution risk with potential of not coming to fruition,” the report concluded.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.