Waste Connections acquires regional hauler and MRF operator Penn Waste

Dive Brief:

Waste Connections has acquired Penn Waste, a private company that provides residential and commercial collection across multiple Pennsylvania counties and operates a large single-stream MRF, according to multiple sources. While neither company responded to a request for comment prior to publication, both have since acknowledged the deal.
Delaware Division of Corporations records indicate an entity called Penn Waste Property Holdings, LLC was formed on Nov. 5. That entity was registered with Pennsylvania's Department of State on Nov. 20, with the same address as Waste Connections' Texas headquarters and CEO Worthing Jackman listed as the manager.
The deal was previously alluded to in a Dec. 17 Waste Connections release reporting the recent closure of transactions in multiple states worth $130 million in annualized revenue, including a "solid waste collection and recycling acquisition in South Central Pennsylvania." The most recent figures for Penn Waste, reported by the Pocono Record, estimated annual revenues of $75 million in 2017.

Dive Insight:

Penn Waste President Scott Wagner reportedly got his start in the industry during the 1970s and co-founded York Waste Disposal in 1985. That company was sold to Republic Services in 1997. In 2000, Wagner started up Penn Waste and has expanded it into a sizable enterprise in the years since. Wagner's business dealings, including a stake in Eagle Disposal and numerous other entities, received attention during an unsuccessful 2018 gubernatorial campaign in Pennsylvania.

According to its website, Penn Waste runs a fleet of more than 130 collection vehicles. The company holds numerous municipal collection contracts throughout the region and also processes significant recycling volumes at its Manchester MRF. Following a $3.5 million upgrade to install Bulk Handling Systems equipment in 2017, the site can now process up to 45 tons per hour and reportedly handled 180,000 tons in 2019. This makes it among the largest single-stream MRFs processing residential material in the United States.

Following commodity market shifts in 2018, Penn Waste stopped accepting certain types of mixed plastics and mixed paper at the facility. The company also sought price increases from area customers, including the Lancaster County Solid Waste Management Authority, which briefly became a campaign issue in Wagner's bid for governor.

Like many in the industry, Waste Connections' recycling revenue declined even more than expected in early 2019 and the company anticipates it is still multiple years into this market evolution. Despite the company's smaller exposure to recycling relative to larger competitors, it has multiple franchise contracts that don't allow pricing terms to be changed as easily. The fact that Penn Waste has already begun resetting its recycling pricing may bode well for integrating these new assets.

Given that the acquisition is fresh it appears this integration process is in the early stages. Penn Waste's website and social media accounts still tout its status as a "locally owned and operated" company, though recent Facebook postings link directly to the Waste Connections recruiting page. The company began hiring for multiple positions at Penn Waste – and Eagle Disposal, indicating a potential acquisition of those assets as well – earlier this month.

This acquisition is a considerable expansion of Waste Connections' presence in Pennsylvania, which already includes two landfills – Bethlehem and Blue Ridge – adjacent to the Penn Waste portfolio. Per the company's December release, this was among a string of deals completed during Q4, including tuck-ins around Alaska, Illinois, New York and Tennessee. In October, Jackman reported the company had extended offers worth more than $600 million since July and was on track to complete another big year of M&A activity.

That trend of major acquisitions and consolidation among the industry's largest players is only expected to continue in 2020. As first reported by Waste Dive, GFL Environmental received regulatory approval for a sizable acquisition of American Waste in Michigan earlier this month. Waste Management's acquisition of Advanced Disposal Services could also close during Q1, pending regulatory approval, and other companies have previewed more activity ahead. Waste Connections is likely to keep up the pace as well, with Jackman previously projecting 2020 would complete a four-year strategy of "outsized" M&A activity.