Waste Management (NYSE:WM) confirmed on Monday the acquisition of Stericycle (NASDAQ:SRCL) for $62 per share in cash, indicating a total enterprise value of around $7.2 billion. This includes around $1.4 billion of Stericycle’s net debt. Stericycle is a compliance company that specializes in the collection and disposal of regulated medical waste. Shares of SRCL soared by more than 10% in pre-market trading following the news.
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The price per share paid by WM for Stericycle indicates a premium of 24% to SRCL’s 60-day volume weighted average price (VWAP) as of May 23, which was the last trading day before the news of Stericycle’s potential sale.
Strategic Benefits for WM From the SRCL Acquisition
WM expects that this acquisition will expand its service offerings. The comprehensive waste management and environmental services company believes that the SRCL acquisition will add a platform of unique assets in the attractive medical waste and secure information destruction industries.
Moreover, the deal is projected to generate more than $125 million in annual run-rate synergies. Over the near term, following the deal, WM anticipates a net debt-to-EBITDA ratio of around 3.4x. The company expects the deal to close by the end of this year.
Is WM Stock a Good Buy?
Analysts remain cautiously optimistic about WM stock, with a Moderate Buy consensus rating based on eight Buys and Holds each. Over the past year, WM has increased by more than 25%, and the average WM price target of $224.57 implies an upside potential of 6.6% from current levels.
