* Deal expected to close in first quarter of 2010
* IESI-BFC shares up 1.2 pct; WSI stock up 3.5 pct (Adds analysts’ comments, details on deal, byline. In U.S. dollars unless noted)
By Euan Rocha
TORONTO, Nov 11 (Reuters) - IESI-BFC Ltd BIN.TO will acquire fellow Canadian trash hauler Waste Services Inc WSII.O in an all-stock deal worth $370 million that will create North America’s third-largest solid-waste management company, the companies said on Wednesday.
The deal will help IESI-BFC, the No. 4 North American trash hauler, expand its presence in Canada and allow it to establish a presence in the U.S. state of Florida, IESI-BFC Chief Executive Keith Carrigan said.
“More importantly, this transaction will allow our two companies to grow more meaningfully than they could on their own,” he added.
Based on 47.66 million Waste Services shares outstanding and an exchange ratio of 0.5833 of an IESI-BFC share for each Waste Services share, the takeover offer implies a deal value of $370 million.
The deal values Waste Services at $7.76 per share, a 7.2 percent premium to its closing share price of $7.24 on Tuesday.
Shareholders of Burlington, Ontario-based Waste Services will own 23 percent of the combined company.
Analysts said the deal is positive for both companies as it is likely to improve IESI-BFC’s valuation versus its peers, while allowing Waste Services’ shareholders to benefit from any upside.
“It’s a great deal. I was looking for them to make some kind of an acquisition and this is a big one,” said Octagon Capital analyst Robert Gibson.
The combined company, to be headquartered in Toronto, will have more than 6,000 employees serving commercial, industrial and residential customers in 11 U.S. states, the District of Columbia and six Canadian provinces.
The deal marks a further rationalization in the North American waste management industry, which saw an extended three-way merger battle in 2008. In July 2008, the No. 1 trash hauler, Waste Management Inc (WM.N), offered to buy smaller rival Republic Services Inc (RSG.N) for $6.2 billion, potentially derailing Republic Services’ bid for Allied Waste Industries. [ID:nN13443567]
The turmoil in global financial markets a few months later prompted Waste Management to withdraw its bid and paved the way for Republic Services to close its $4.4 billion acquisition of Allied Waste, which made it the second largest solid-waste management company in North America. [ID:nN03352696]
IESI-BFC and Waste Services, in a joint statement, said their proposed deal will boost both free cash flow and earnings per share in 2010.
“I think this deal makes a tremendous amount of sense strategically,” said Michael Hoffman of Wunderlich Securities.
IESI-BFC said shareholders of the combined company will receive the regular C$0.125 quarterly dividend per share currently paid to IESI-BFC shareholders.
“I would conclude from this deal that dividends will only get better, this does not put the dividend at risk at all,” Hoffman said.
The combined company is expected to realize annual pretax savings of from $25 million to $30 million within two years of closing the deal.
Two of Waste Services’ largest shareholders, Westbury and Kelso & Co, which together control 33 percent of the company’s outstanding shares, have agreed to back the deal, the companies said.
The deal is expected to close in the first quarter of 2010 and has been approved by the boards of directors of both companies. It is subject to regulatory approvals in both Canada and the United States.
The agreement will allow Waste Services to nominate two directors to IESI-BFC’s board. The combined company will trade under IESI-BFC’s existing BIN ticker on both the New York and Toronto stock exchanges.
IESI-BFC’s Carrigan will continue as CEO of the combined company.
IESI-BFC shares were up 1.2 percent at midday on Wednesday on the New York Stock Exchange, while Waste Services was up 3.5 percent at $7.50 on Nasdaq. ($1=$1.04 Canadian) (Reporting by Euan Rocha, editing by Peter Galloway)