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Progressive Waste Confirms it Has Commenced a Review of Strategic Alternatives

Responding to a Bloomberg report from Monday, Progressive Waste Solutions Ltd. acknowledged that it is reviewing its strategic alternatives.

Bloomberg published an article that claimed the Vaughan, Ontario-based waste and recycling company is exploring a sale after cutting its profit forecast because of rising costs. Bloomberg reported that the firm has reached out to potential buyers, but talks are preliminary and the company may decide against pursuing a sale.

In response, Progressive issued a release saying it "has commenced a review of strategic alternatives with the objective of enhancing shareholder value." The directors formed a committee to oversee the review, and retained J.P. Morgan Securities LLC as its financial advisor.

Progressive said in a statement, “The company is aware of press reports speculating about the process. The company cautions investors not to rely on these press reports, as there can be no assurance that the review of strategic alternatives will result in any change in the company's business strategy or in the consummation of any agreement or transaction, and if one does occur, what the economic and other terms and conditions of any transaction might be.”

Progressive Waste said it will not make any further public comments on the issue until the review is completed.

St. Louis-based securities firm Stifel, Nicolaus & Co. Inc. reported on the developments, commenting on a possible sale, “Never say never. Financially (Progressive) may be in play as strategic buyers could get a deal d that is a substantial premium to the current stock price and still accretive. Canadian (boards of directors) do act far more independently than U.S. (boards of directors).” But Stifel indicated that there are no strong signs that Progressive is being shopped.

Analyzing potential buyers, Stifel commented that Waste Connections Inc., based in The Woodlands, Texas, is focused on non-urban and exclusive markets, while Progressive is predominantly an urban company. With Phoenix-based Republic Services, there is little overlap, so the fit is good. As for Houston-based Waste Management Inc., Stifel reported, the industry’s biggest firm likely would be forced to sell off too many assets, or assets not of its choosing.

Progressive also could be a buyer, and make a large acquisition move.

Progressive had financial struggles for its most recent quarter in its West region. Margins unexpectedly fell to 23.3 percent from 25.9 percent the previous year. “Although its North and East regions had solid margin progress, the West region experienced large, unanticipated cost overruns stemming primarily from poor fleet maintenance (and local management) issues, which caused the company to pre-announce a $10 million quarterly EBITDA (earnings before interest, taxes, depreciation and amortization) shortfall and change its full-year guidance as a result,” Leone Young chronicled in her November Business Insights column.

Progressive lowered its full year EBITDA target to $480 million to $485 million from $500 million to $515 million.

That month, Progressive also realigned its reporting segments, to position the company to achieve its plan for operational excellence. In addition, Progressive reallocated certain selling, general and administration expenses to operating expenses to provide better comparability within its industry group. Further, it is adjusting capital and landfill asset purchases for non-cash working capital changes in the calculation of free cash flow.

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