[GRRN] Waste Industry Consolidation

RecycleWorlds (anderson@msn.fullfeed.com)
Mon, 26 Apr 1999 17:35:32 -0500

A small article in 4/26/98 Waste News ("Waste Management CEO joins
board," p. 6), piqued my interest and I wonder if anyone else has any
information in this regard.

According to the article (1) new Waste Management CEO John Drury has
joined the Board of Directors of US Plastic Lumber Corp. and (2) the new
Board Chair of Plastic Lumber is Louis Paolino.

Lou Paolino was formerly the CEO of Eastern Environmental Services from
1996 until it was acquired by the newly merged USA Waste and Waste
Management last August, and, prior that time, he ran John Drury's USA Waste
operations in the northeast (8/24/98 Waste News, "Eastern falling to WMI,"
p. 1).

One other thing. New WMI only paid a token 5% premium in its offer
which Eastern's officers and board accepted for a merger (typical merger
acquisition premiums are in the 25-30% range). Mr. Paolino justified the
low premium, first by stating that the absence of any significant premium
was because there had been a runup on Eastern's stock in antipation of the
merger, and, alternatively, that the merger would enable Eastern's
stockholders to share in the potential for greater increases in the share
value of WMI's stock. (8/31/98 Waste News, "Shareholder sues Eastern over
merger," p. 1).

However, as to the first, Eastern's 52 week high was $37-3/4 compared
to their then current price of $31-5/8, that is to say, there was no runup.
As to the greater upside potential, for this to happen market's expected
earnings growth from WMI stock as indicated by its price/earnings ratio
would have to be greater than from Eastern. However, again, this does not
fit with the financial data on its face. WMI's p/e was 32 while Eastern's
was 75.

That is to say, the financial numbers on their face do not seem to
fully explain the reason why Eastern sold out to new WMI. Nor does USA
Waste Drury's historic disinterest in recycling (he was fired from BFI by
Bill Ruckelshaus who called Drury "a dinosaur" for opposing recycling,
3/11/98 Wall Street Journal, "USA Waste Services Is Set to Take Over Waste
Management") explain his sudden interest in Plastic Lumber.

Peter Anderson
RecycleWorlds Consulting
4513 Vernon Blvd. Ste. 15
Madison, WI 53705-4964
Phone:(608) 231-1100/Fax: (608) 233-0011