News & Analysis

Macquarie fund pays $526m for waste firm

Macquarie Infrastructure Partners II will pay $526m for Houston-based WCA Waste Corp, which is active in the Midwest and Southwest of the US. The deal marks the second US waste management acquisition for Macquarie.

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A Macquarie Group infrastructure investment fund is acquiring WCA Waste Corp for $526 million, according to a press release.

Macquarie Infrastructure Partners II (MIP II) purchased WCA for $6.50 a share, 30 percent more than its $4.99 closing stock price Tuesday.

WCA Waste Corp. was trading at around $6.38 when the stock market opened Thursday.

A statement from Houston-headquartered WCA praised Macquarie for its “demonstrated track record in the waste management sector”.

The WCA statement added that its 450,000-strong customer base, located throughout the US' Midwest and Southwest, “should not see any impact on day-to-day service”.

For WCA, the premium on its acquisition price represents a fulfillment of fiduciary duty by its management team, led by chairman and chief executive officer Tom Fatjo. But Maryland law firm Brower Piven in an announcement said it was seeking to investigate the deal to find out if shareholder interest had been protected. Macquarie declined to comment.

A spokeswoman for Sydney, Australia-based Macquarie said her company gained experience in US waste management with its purchase of Waste Industries USA.

In 2008, Macquarie Infrastructure Partners I, the predecessor fund to MIP II, teamed with Wall Street firm Goldman Sachs to acquire Waste Industries, based in Raleigh, North Carolina, for $545 million, or $38 a share.

A privatised waste management company can gain capital needed to grow and develop its business and servicing capability, while avoiding quarterly valuations scrutiny by Wall Street. Building a landfill, for example, can be a long-term endeavour with a corrosive effect on short-term financial performance for a publicly traded waste management company.

Though not a traditional infrastructure play, waste management has come into favour in the asset class. Garbage disposal, for instance, is a business with inelastic demand, as well as a low correlation to the economic climate.

The transaction, expected to close in the first quarter of 2012, will be financed by existing MIP II shareholder capital and a new credit facility.