Dive Brief:

• Earlier this month, Waste Management and Republic Services finalized two Texas transactions that saw them cede positions in respective metro areas. The deals yielded few headlines, and both companies declined interviews on the subject.
• Waste Management acquired collection contracts from Republic for five Austin-area municipalities and one unincorporated area, along with operation of Burnet County's transfer station, according to DailyTrib.com.
• Republic acquired collection contracts and assets from Waste Management in the Dallas-Fort Worth area. The Carrollton Leader reported its city was among them. A story by The Lewisville Texan Journal indicated the deal would also include Lewisville and surrounding areas, pending local legislative approval.

Dive Insight:

It's not uncommon for some of the industry's largest companies to do business with each other when the opportunity presents itself — sometimes even on a national scale. For instance, a 2009 deal between Waste Connections and Republic Services valued at approximately $110 million in acquired revenue encompassed seven different markets.

By comparison, these Texas transactions are likely much smaller — the full scope of assets sold were not disclosed — but when looking a step beyond the details, the driving forces behind these buy-sell deals tell a deeper story.

"We are continuously evaluating our assets in all of our markets for financial viability, based on the profitability of the book of business held and the market dynamics for post collection infrastructure. From time to time, we see parts of the business that are positioned for sale...." wrote Richard Coupland, vice president of municipal services for Republic, in an emailed statement prior to the deals' closure.

Republic's Sunset Farms Landfill in Austin ceased operation in 2015 due to permit conditions from the Texas Commission on Environmental Quality (TCEQ). The decision was considered a serious setback, with an estimated 3.6 million tons of capacity remaining as of 2016. Meanwhile TCEQ's latest annual report showed that Waste Management's Austin Community Landfill, located directly adjacent, had more than twice that capacity. Local rumblings, highlighted by a recent Spectrum News story, indicate the company may pursue an expansion in the future.

Up north, the balance of power is reversed. Waste Management's DFW Landfill in the suburb of Denton has only four years of permitted life remaining. Sources indicate the company has also lost multiple local collection contracts in recent years. The Lewisville Texan reported on efforts to expand that site as recently as last year, which have since dissipated. Republic's Camelot Landfill, also adjacent, recently received approval for a major vertical expansion that TCEQ estimates will grant it up to 68 years of capacity. Republic's brand new MRF in Plano, just east of Dallas, further adds to the company's position.

In an interview with the Texan, Waste Management spokesperson Greta Calvery was described as saying, "With the landfills’ lifespans passing each other in this way, selling area trash disposal contracts to Republic Services made sense." 

These two companies are of course far from the only major players in the Austin and Dallas-Fort Worth areas — let alone Texas — but their moves are illustrative of broader market forces in the state. According to TCEQ, the state had 196 active MSW landfills (of varying categories) with an estimated 55 years of remaining capacity through the end of 2017. The average tip fee, based on a smaller sample size, was $35.78.

Compared to many other states, this is a veritable bounty of low-cost disposal options. But with so many places to go in most metro areas, distance and control are even more important than usual. This recent pair of transactions between Waste Management and Republic Services highlights just how critical vertical integration is to their business models both locally and nationally.