HOUSTON -- Waste Management Inc. said yesterday that it will buy Eastern Environmental Services Inc. for about $1.19 billion in stock as the largest U.S. waste-disposal company boosts its business in a region spanning New York to Florida.
Houston-based Waste Management will pay 0.6406 share for each share of Eastern Environmental. The agreement values Eastern Environmental at about $32.91 a share, based on Waste Management's closing price of $51.38 yesterday. Eastern Environmental shares fell $1.38 to $30.63.
Eastern Environmental, with sales of $253 million for the year that ended June 30, adds to Waste Management's trash-hauling business and gives it six landfills on the East Coast. The timing might concern some investors because Waste Management hasn't integrated its last merger, but analysts said the latest purchase should work because the two companies are similar and Waste Management, with $2.61 billion in 1997 revenue, is much bigger.
"This is a tuck-in. It is not swallowing a big fish," said William Brennan, an analyst at Pacific Growth Equities in San Francisco.
Like Waste Management, Eastern has grown through buying other companies. Waste Management is likely to continue that trend as it seeks to cut costs further.
"Management has said they will continue to be in a buying mode. We expect them to make more acquisitions," said Mari Bari, an analyst at Deutsche Bank Securities.
Waste Management said the Eastern Environmental acquisition will add about 5 cents a share to 1999 earnings. Waste Management had been expected to earn $3.01 a share in 1999, according to an analyst survey conducted by First Call Corp.
The acquisition will result in cost savings of about $75 million in 1999 through the elimination of Eastern's corporate office, route consolidation in areas where both companies operate and job cuts, said Cherie Rice, a Waste Management spokeswoman.
"It should be an easy integration," Deutsche Bank's Bari said.
Rice said she doesn't know how many employees will lose their jobs as a result of the acquisition.
Mount Laurel, N.J.-based Eastern Environmental, which owns six landfills for nonhazardous waste in the East, generates 80 percent of its sales from solid nonhazardous waste collection and transportation.
The company has operations in New York, New Jersey, Pennsylvania, Florida, Illinois, Indiana, South Carolina, West Virginia, Virginia and Georgia.
Pub Date: 8/18/98