[GRRN] Wall Street Journal article : Allied / BFI merger

Roger M. Guttentag (rgutten@concentric.net)
Mon, 08 Mar 1999 09:25:30 -0500

Dear List Members:

In order to prove that Peter Anderson is not the only one who reads the
Wall Street Journal, please note that in today's issue there is a front
page article about an impending announcement of Allied Waste's merger
with BFI ; showing that the solid waste industry consolidation trend is
still rolling along. The article discusses some of the reasons why BFI
has become an acquisition target for a smaller rival (much like the USA
Waste / Waste Management merger). Some play is given to the problems
that BFI encountered through it development of its recycling services:

"William D. Ruckelshaus, a former Environmental Protection Agency chief
brought in as chief executive, seemed to craft a turnaround by stressing
recycling, but that lasted only as long as a brief spike in used-paper

However, my opinion is that the article seems to indicate that the lion's
share of BFI's earnings problems were due to its management of revenues
from landfill tipping fees:

"As the longtime No. 2 in the waste industry, Browning-Ferris has
disappointed investors with its stock price and earnings for most of the
1990s. Early on, it lacked the national garbage-dump capacity of rival
Waste Management, and lost out as dumping prices went sky high in the
late 1980s and early 1990s....Mr. Ruckelshaus stepped aside as CEO in
late 1995, remaining chairman, and it was left to a long-time
waste-industry manager, Bruce E. Ranck, to attempt to fix things.
However, the 50-year-old Mr. Ranck hasn't cut costs deeply enough to
satisfy some on Wall Street, nor has he found a way to boost revenue
sharply in a waste market plagued by a glut of dump capacity, which
depresses prices."

The article goes on to report that Allied's intentions after the merger
will be similar to USA Waste's : cut costs and stick to core business
interests / competencies - primarily waste collection. The implication
to me is that recycling will not be viewed by the new company as a key
strategy for earnings growth or enhancing common stock values but rather
more as a business tactic to be considered only in defense of its core
business interests - that being waste collection and disposal.


Roger M. Guttentag


Read <italic>Recycling in Cyberspace</italic> in Resource Recycling

March, 1999 topic - Big City Recycling