RSG stock is experiencing volatile trade in pre-market trading on February 9, 2022, after the company announced that it was acquiring US Ecology for $2.2 billion. The company is announcing earnings on February 10, 2022.
Republic Services to Acquire US Ecology, a Leading Environmental Solutions Company
Republic Services, Inc. (NYSE: RSG) and US Ecology, Inc. (NASDAQ-GS: ECOL) have entered into a definitive agreement under which Republic Services will acquire all outstanding shares of US Ecology for $48 per share in cash, representing a total value of approximately $2.2 billion including net debt of approximately $0.7 billion.
“Today’s announcement enables Republic Services to provide customers with one of the most complete set of product offerings across the environmental services space and creates significant value for our stakeholders,” said Jon Vander Ark, president and chief executive officer at Republic Services. “This strategic acquisition expands our geographic footprint across the U.S. and Canada and provides vertical integration capabilities for our environmental solutions business.”
“We are pleased to have reached this agreement with Republic Services, an established leader in the industry, recognized for its commitment to safety, sustainability and superior customer service,” said Jeff Feeler, chairman, chief executive officer and president at US Ecology. “2022 marks US Ecology’s 70th year of operations, built around providing environmental solutions that protect human health and the environment. The combination of our companies provides a platform to accelerate our common strategy of providing a full complement of environmental solutions to better our world. In addition, this transaction showcases the value of US Ecology’s business, providing our stockholders with an attractive and certain value, and brings together a network of assets with extensive environmental solutions expertise to handle customers’ most challenging and complex needs. I would like to thank US Ecology’s employees for their hard work and dedication to this mission. We look forward to working with the Republic Services team to complete the transaction and deliver premium products and services.”
Strategic and Financial Benefits
Vertically integrates and expands Republic’s environmental solutions footprint. The acquisition of US Ecology will add a national platform of difficult-to-replicate assets and talent to enable Republic to provide customers environmental solutions from collection through disposal. This includes adding nine specialty waste landfills with five hazardous waste landfills, 16 RCRA permitted TSDFs, seven wastewater treatment facilities, and over 80 environmental services field locations including treatment and recycling centers.
Positions Republic as a single-source partner for customers. Customers with multiple recycling and waste service needs value the ability to consolidate services with a single partner who has a successful track record of safety, compliance, and environmental responsibility. The acquisition will allow Republic to provide customers a comprehensive set of environmental services including recycling, solid waste, special waste, hazardous waste, container rental and field services.
Expects meaningful synergy opportunities and to be financially accretive. The acquisition will allow Republic to leverage its core capabilities, standardized operating model and investment in digital to enhance profitability across the new portfolio of assets. Republic expects the transaction to be immediately accretive to adjusted earnings and free cash flow. Republic anticipates approximately $40 million in cost synergies within three years following the acquisition, expected to result in double-digit returns. The combined company adjusted free cash flow conversion is expected to be at least 47 percent by 2024.
Accelerates growth opportunities. Expanding Republic’s environmental solutions footprint and capabilities will create the opportunity for outsized revenue growth. The combined business is expected to drive cross-selling opportunities between existing customers of Republic and US Ecology. The acquisition of US Ecology will also provide Republic a platform to pursue additional tuck-in acquisitions in the highly fragmented environmental solutions business.
Financing – The transaction is not subject to a financing condition. Republic Services intends to finance the transaction using existing and new sources of debt.
Following completion of the transaction, Republic Services expects to maintain a strong balance sheet and solid investment-grade credit rating. The Company plans net debt-to-EBITDA, as defined in our credit agreement, to return back below 3x within 18 months of closing the transaction.
Timing and Approvals – The transaction was unanimously approved by the boards of directors of both companies and is expected to close by the end of the second quarter, subject to the satisfaction of customary closing conditions, including receipt of regulatory approvals and approval by holders of a majority of the outstanding shares of US Ecology’s common stock.
Advisors – Moelis & Company LLC is serving as exclusive financial advisor to Republic Services and Davis Polk & Wardwell LLP is serving as Republic Services’ legal counsel. Barclays PLC and Houlihan Lokey Capital, Inc. are serving as co-financial advisors to US Ecology. Dechert LLP is serving as US Ecology’s legal counsel.
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📉 RSG Stock Technical Analysis
The long-term trend is neutral, but the short-term trend is negative. RSG is part of the Commercial Services & Supplies industry. There are 99 other stocks in this industry. RSG outperforms 91% of them. RSG is currently trading in the middle of its 52-week range. The S&P500 Index however is trading in the upper part of its 52-week range, so RSG is lagging the market slightly. RSG is currently showing a bear flag pattern! A bear flag pattern occurs when prices pull back slightly after a strong move down. This may present a good short opportunity.
There is a support zone ranging from 123.34 to 126.73. This zone is formed by a combination of multiple trend lines and important moving averages in multiple time frames. There is also support at 120.01 from a horizontal line in the daily time frame. Finally, there is support at 107.00 from a trend line in the weekly time frame.
There is a resistance zone ranging from 138.39 to 139.46. This zone is formed by a combination of multiple trend lines in multiple time frames.
Although the technical rating is bad, RSG does present a nice setup opportunity. RSG stock has a Setup Rating of 8 out of 10. Prices have been consolidating lately and the volatility has been reduced. There is a support zone below the current price at 126.73, a Stop Loss order could be placed below this zone.