Waste Business Journal

Who Will Buy Veolia's US Waste Business?

Date: December 13, 2011

Source: News Room

Potential bidders fo all or part of business Waste Connections - would also need equity firm involvement, drawback is unfamiliar turf and direct competition in big markets of Chicago, Detroit, New York, integration issues Republic Services - antitrust issues, especially since Veolia had acquired some assets divested from Republic in order to merge with Allied. Progressive Waste Solutions - would need equity firm involvement since not enough cash on hand Waste Management Not selling Veolia ES Technical Solutions or Veolia ES Industrial Services ------------------ Veolia to Sell U.S. Solid Waste Operation The United States solid waste operation of Veolia Environmental Services, among the largest in the nation, is up for sale. Paris-based Veolia said it plans to Sell Veolia ES Solid Waste Inc. as part of a massive restructuring plan to raise $6.7 billion for reducing debt. Veolia Environmental Services North America (VESNA), based in Chicago, will retain its two other business units, Veolia ES Technical Solutions and Veolia ES Industrial Services. VESNA also will keep its Canadian solid waste business. VESNA ranked third on the Waste Age 100 with 2010 revenue of $1.9 billion and about 10,000 employees. The U.S. solid waste operations include 29 landfills, 72 collection operations, 17 recycling facilities and 43 transfer stations, most east of the Mississippi River. “These divestiture plans are in support of [Veolia Environmental’s] existing program to pay down debt and increase cash flow, which has been in place since 2009 and was expanded earlier this year,” said Richard Burke, President and chief executive officer for VESNA, in a news release. “Our solid waste business is self-sustaining, profitable and highly marketable, and its sale will make a significant contribution to the financial well-being of Veolia globally. As the company seeks a buyer, we will continue with business as usual.” In addition to its U.S. operations, Veolia plans to sell its 50-percent stake in the French transportation division Veolia Transdev, which is co-owned French state-owned financial institution Caisse des Dépôts et Consignations, and its regulated water business in the United Kingdom, the company said in its Paris-based news release. Proceeds from all asset sales will mainly be used to pay down debt. The company said it expects to reduce debt below $16.1 billion by the end of 2013. “This transformation will provide the means to significantly improve the company’s financial flexibility,” Veolia said. Michael Hoffman, director of research at Wunderlich Securities Inc., said the sale had been rumored for some time. “I’m surprised only to the degree that it’s very profitable and generates good cash flow,” he says in an interview. “My sense is that they’re selling because they’re not gong to be No. 3 or No. 4; they’ll be No. 5,” he continues. “Being big is not a good strategy. Being big in a local market is a great strategy. They’ve got a really good footprint. They’re big in the right way.” Hoffman says Veolia should get a nice price for the U.S. operations, possibly $1.4 billion or more. Subtract $600 million for debt and Veolia should end up with at least $800 million in cash from the deal. Hoffman says the announcement indicates that Veolia is putting the business up for auction, and that could hamper a deal with the most logical buyer. “The natural buyer is Waste Management, but if you do an auction it will limit their ability to play,” he says. An auction likely would drive the price up. “How can Waste Management get in an auction and not have the stock market rip their head off? But maybe that is a drink they’d be willing to swallow.” For one, it would bring Waste Management landfills in the Midwest that would fill a void. Hoffman doubts Republic Services Inc. would be a buyer, since many of Veolia’s operations once belonged to Republic until they had to divest them with the Allied Waste Industries Inc. purchase in 2008. Waste Connections Inc. could do it, but it might not make sense strategically, Hoffman says. Selling the U.S. operations all at once is the ideal strategy, he says, but “it might have more value [selling] piecemeal, if you’re willing to take the time to do it.” It also could be sold partly with cash and partly with an equity position in the buyer, which could be attractive to Veolia, he says. ----------------- Veolia ES Solid Waste up for sale, says parent company Share| Dec. 6 -- Veolia ES Solid Waste Inc., one of the country´s largest solid waste management companies, is going on the auction block. Paris-based Veolia Environment, which operates in dozens of countries around the world, announced today that it wants to sell its solid waste business in the United States. "Veolia´s Board of Directors approved this decision and the company will be actively moving forward with finding an appropriate buyer for Veolia ES Solid Waste Inc.," said Richard Burke, CEO of Veolia Environmental Services North America, parent company to Veolia ES Solid Waste, in a statement this morning. "These divestiture plans are in support of VE´s existing program to pay down debt and increase cash flow, which has been in place since 2009 and was expanded earlier this year. Our Solid Waste business is self-sustaining, profitable and highly marketable, and its sale will make a significant contribution to the financial wellbeing of Veolia globally," Burke said. Business will continue as usual as the company seeks a buyer, Burke indicated. The decision to sell the company´s solid waste operations in the United States follows the earlier divestiture of Veolia’s waste-to-energy operations. Veolia Environmental Services North America is ranked No .6 in the Waste & Recycling News Top 100 Hauling and Disposal Rankings. The company reported $1.1 billion in hauling revenue in 2010, with 10,000 employees and more than 2,700 hauling trucks. ---------------- Veolia ES Veolia to Offload U.S. Waste Business 07 December 2011 In an effort to reduce its debt by raising 5 billion Euros, French Waste and Water company Veolia Environnement, is considering off loading its U.S. waste business. According to the company, for the period 2012 to 2013 it has an objective to divest 5 billion Euros in assets and reduce net financial debt below 12 billion Euros by the end of 2013. The company recently laid out its three tiered transformation plan and financial outlook. In view of this plan, the company said that it will accelerate the restructuring of its activities. In particular, the company intends to divest its regulated water operations in the UK and solid waste operations in the U.S., which had revenues of $822 million in 2010, as well as continue to rationalise its geographic footprint. The company also said that it has commenced a significant organisational transformation, incorporating plans to standardise processes, reinforce management and operational control and streamline its organisational structure. In addition Veolia said that it will initiate a program of increased targeted cost reductions, which, based on its new perimeter, it expects to contribute 120 million Euros (net of implementation costs) to operating income in 2013, 220 million Euros in 2014 and 420 million Euros in 2015. After 2013, and assuming a mid-cycle economic environment, the company said that it is targeting annual organic revenue growth of more than 3% and to return to a dividend payout ratio in line with its historic average. Antoine Frérot, chairman and chief executive officer at Veolia Environnement commented: "The strategic plan that we are announcing today is going to drive a profound transformation of our Company in order to adapt to the current economic and financial environment and to quickly position Veolia Environnement to capture the most attractive growth opportunities. It is an ambitious, but realistic plan." ------------------- Veolia chief sets two-year deadline for turnround By James Boxell in Paris Antoine Frérot, Veolia’s chief executive, is giving himself two years to turn things round at the ailing French water, waste and energy services company. But investors will want some earlier evidence of progress before they renew their faith in a group that has delivered two profit warnings this year and an €800m writedown. Mr Frérot showed a willingness to be radical this week when he said the company – a provider or drinking water and wastewater services to 173m people – was selling its 50 per cent stake in Transdev, one of the world’s biggest public transport groups. He also wants to sell its UK water business and US solid waste division. Analysts believe the three assets could bring in €3bn-€3.5bn, going some way towards Mr Frérot’s €5bn disposal target as he tries to cut the company’s €14.7bn net debt. There are, however, doubts about how he will be able to pull off the deals, with Europe plunged into a debt crisis and financial and trade buyers hard to find. This explains why Veolia’s shares, already at an all-time low, fell 7 per cent this week even though investors welcomed the sale plan. Caisse des Dépôts et Consignations, a French state bank that owns the other half of Transdev, could come to the rescue and buy out its partner. But even if he finds buyers, Mr Frérot still has the stiff task of exiting almost half of the 77 countries where Veolia does business and making some sense of a sprawling business bequeathed to him by his predecessor. ------------- Veolia Environnement (VE) announces its intention to sell the Solid Waste division of Veolia Environmental Services in the US Richard Burke, President and CEO for Veolia Environmental Services North America Corp. (VESNA), released the following statement regarding today’s earnings announcement by Veolia Environnement in France. “Early this morning, our parent company, Veolia Environnement (VE), announced to the financial media its intent to exit the solid waste business in the United States. Veolia’s Board of Directors approved this decision and the company will be actively moving forward with finding an appropriate buyer for Veolia ES Solid Waste, Inc.” “These divestiture plans are in support of VE’s existing program to pay down debt and increase cash flow, which has been in place since 2009 and was expanded earlier this year. Our Solid Waste business is self-sustaining, profitable and highly marketable, and its sale will make a significant contribution to the financial wellbeing of Veolia globally.” “As the company seeks a buyer, we will continue with business as usual. Our drivers, sales teams, customer service representatives and managers will continue to provide a top quality service and we will deliver on our promise to ‘Service First, Safety Always’. We will honor our contracts and partnerships, and conduct business responsibly and without interruption throughout this process.” “The normal operations and support functions for our other business units, Veolia ES Technical Solutions and Veolia ES Industrial Services, are not directly impacted.”