Waste Management to Buy Eastern Environmental

NEW YORK —  Waste Management Inc. said Monday that it plans to buy smaller competitor Eastern Environmental Services Inc. for $1.18 billion in stock, shoring up its position as the nation’s largest garbage hauler.

The proposed acquisition comes on the heels of Waste Management’s recent $13.5-billion merger with USA Waste Services and is the latest in a wave of consolidations in the solid-waste industry.

Mount Laurel, N.J.-based Eastern Environmental operates primarily on the East Coast, with landfills in West Virginia, South Carolina and Kentucky.

The deal calls for shareholders of Eastern to receive 0.6406 share of Waste Management stock for each share of Eastern, the companies said in a joint statement. It also includes the assumption of $52 million in debt.

But concerns about the transaction battered both stocks and eroded the price of the deal, which originally valued Eastern Environmental at $33.75 per share, or $1.22 billion.

By day’s end, the deal was worth $32.86 per share, or $1.18 billion based on Eastern’s 36 million outstanding shares.

“We’re sorry to see the stock come down. We think this is a fantastic transaction,” Waste Management Chief Executive John Drury said in a conference call with investors and analysts.

Several participants in the call grilled top executives of both companies, questioning Waste Management’s ability to fold in Eastern at the same time it is integrating operations from the USA Waste deal.

They also challenged the swiftness of the deal, which came together over the last few days after Eastern Chairman Louis Paolino approached Waste Management Chief Executive John Drury last Monday.

The executives defended the deal, saying the two companies are well-acquainted with each other’s operations.

Waste Management expects the transaction to result in savings of $75 million and an earnings boost of 5 cents per share next year.

The deal is expected to close in December.

Shares of Waste Management fell $1.31 to close at $51.38 on the New York Stock Exchange. Eastern lost $1.38 to close at $30.63 on the Nasdaq.