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UPDATE 2-Waste Connections buys R360 to expand oilfield services
September 17, 2012 / 1:07 PM / 5 years ago

UPDATE 2-Waste Connections buys R360 to expand oilfield services

* Acquires R360 Environmental Solutions for $1.3 bln

* Gains access to Permian, Bakken and Eagle Ford basins

* Expects deal to add more than 400 basis points to EBITDA margin

* Shares rise 9.5 percent

Sept 17 (Reuters) - Waste Connections Inc will buy privately held R360 Environmental Solutions Inc for about $1.3 billion to expand its oilfield waste management services, sending its shares up 9.5 percent.

Municipal Solid Waste (MSW) volumes have been under pressure in a weak U.S. economy, forcing waste management companies to look at alternative sources to boost revenue.

“While a tepid economy has impacted MSW volumes, increased drilling activity in unconventional areas is fueling impressive organic growth within the exploration and production (E&P) waste sector,” Waste Connections Chief Executive Ronald Mittelstaedt said in a statement.

The deal provides Waste Connections with access to several active natural resource producing areas in the United States, including the oil-rich Permian, Bakken and Eagle Ford basins, and adds to its exploration and production (E&P) facility in Southwest Louisiana.

“Energy waste growth potential in the Eagle Ford, Bakken, Permian is robust... These three plays are the most dynamic in the U.S. and should experience robust new well development north of $75 per barrel,” Wunderlich Securities analyst Michael Hoffman wrote in a note to clients.

Waste Connections, which provides solid waste collection, transfer, disposal and recycling services, expects the deal to close in the fourth quarter.

The deal is expected to add more than 400 basis points to Waste Connections’s consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) margin, Mittelstaedt said.

Analyst Hoffman, rated three stars for the accuracy of his earnings estimates on Waste Connections according to Thomson Reuters StarMine data, expects the deal to add more than 40 cents to Waste Connections’s 2013 earnings.

R360 Environmental Solutions, which provides recovery and disposal services in the United States, operates 26 facilities and has annual revenue of about $300 million.

Shares of Woodlands, Texas-based Waste Connections were up 8 percent at $31.90 on the New York Stock Exchange on Monday. The stock was the highest percentage gainer on the exchange.

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