Waste Connections: Announces Acquisition of Canadian Disposal Assets; Raising Fair Value Estimate

On Dec. 11, Waste Connections announced that it has agreed to acquire disposal assets in western Canada from Secure Energy Services for CAD 1.075 billion. These assets consist of 18 treatment, recovery, and disposal facilities, six landfills, four saltwater disposal injection wells, and two disposal caverns. Collectively, these assets generate annual revenue of approximately CAD 300 million. Management disclosed that these assets will increase Waste Connections’ pro forma EBITDA margin by 50 basis points. Based on our math, management targets about a 50% EBITDA margin for these assets, which is what we’d expect from high-quality disposal assets along with potential synergies. Management expects the deal to close during the first quarter of 2024. After updating our valuation model to include this acquisition, we’ve raised our fair value estimate for the New York Stock Exchange-listed shares by about 2.5% to $124. Our fair value estimate for the Toronto Stock Exchange-listed shares has increased to CAD 169 from CAD 163 due to the inclusion of the acquisition and the change in the U.S. dollar/Canadian dollar exchange ratio since our last update.