Stericycle Inc . (NASDAQ:SRCL), a leader in hazardous waste management, announced Monday that it has received a supplementary information request (SIR) from the Competition Bureau of Canada regarding its pending merger with Waste Management Inc. (NYSE:NYSE:WM). This request extends the waiting period under the Canadian Competition Act, delaying the merger's finalization.
The SIR, issued on Sunday, requires additional information from both companies and prolongs the approval process by at least 30 days post-compliance. However, Stericycle and Waste Management remain confident in their ability to address the bureau's inquiries promptly.
This regulatory hurdle follows the companies' compliance with multiple antitrust and investment authorities, including the Hart-Scott-Rodino Act in the U.S., and approvals from Portugal's Competition Authority, the UK's Investment Security Unit, and Spain's National Markets and Competition Commission. Stericycle's shareholders had also voted in favor of the merger on August 14, 2024.
Despite this setback, Stericycle expects the merger to close as early as the fourth quarter of 2024, subject to the resolution of the Canadian review and other standard closing conditions. The merger, first announced on June 3, 2024, entails Stericycle becoming a wholly-owned subsidiary of Waste Management.
The companies have not disclosed any financial terms or the merger's potential impact on operations and staffing. Stericycle's management has emphasized that forward-looking statements regarding the merger's completion and benefits are based on current expectations and are subject to change.
In other recent news, Waste Management Inc. is making significant strides towards its acquisition of Stericycle Inc. The merger, which has received antitrust clearance from Portugal's Competition Authority and the UK Competition and Markets Authority, is expected to be finalized as early as the fourth quarter of 2024, pending additional regulatory approvals. This move is set to enhance Waste Management's portfolio, positioning it as a comprehensive environmental services provider.
Analyst firms have been closely monitoring these developments. BMO Capital Markets has maintained a Market Perform rating for Waste Management, despite lowering its price target from $215 to $213. This adjustment followed the company's Q2/24 results, which indicated softer than anticipated performance. However, BMO Capital Markets still sees a clear path to earnings growth for Waste Management over the next two to three years.
Baird also adjusted its price target for Waste Management, reducing it from $226 to $216, while maintaining a Neutral rating. Despite Q2/24 results that met expectations, Baird sees Waste Management's shares becoming more attractive following market pullback.
Waste Management reported a 30% operating EBITDA margin and double-digit EBITDA growth in Q2/24, largely due to effective pricing strategies and operational efficiencies. The company is optimistic about their 2025 performance, expecting strong demand for medical waste services due to an aging population. However, they have temporarily suspended their share repurchase program due to increased leverage from acquisitions.
InvestingPro Insights
As Stericycle Inc. (NASDAQ:SRCL) navigates through regulatory challenges with its pending merger, investors and industry analysts are closely monitoring the company's financial health and stock performance. According to InvestingPro data, Stericycle's market capitalization stands at $5.73 billion, reflecting its substantial presence in the waste management industry. Despite a recent decrease in revenue growth, down 3.04% over the last twelve months as of Q2 2024, the company maintains a gross profit margin of 38.09%, highlighting efficient operations.
InvestingPro Tips suggest that while Stericycle's net income is expected to grow this year, which aligns with the company's positive outlook post-merger, some caution is warranted. Two analysts have revised their earnings estimates downwards for the upcoming period, indicating potential concerns about future profitability. Additionally, the stock is currently trading near its 52-week high with a price of $61.68, and the Relative Strength Index (RSI) suggests it is in overbought territory, which could signal a near-term pullback or consolidation.
For investors looking for more nuanced analysis, InvestingPro offers additional tips on Stericycle, including insights on earnings multiples and price volatility. With the merger's potential to reshape Stericycle's financial landscape, these InvestingPro Tips could be instrumental in making informed investment decisions. There are 10 more tips available on the InvestingPro platform for Stericycle, providing a comprehensive view of the company's financial metrics and stock performance.
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