On Thursday, Stifel maintained a Hold rating on Stericycle (NASDAQ:SRCL) stock with a consistent price target of $62.00. This affirmation comes in the wake of Waste Management's (NYSE:NYSE:WM) announcement on June 3, 2024, to purchase Stericycle shares at the same price of $62 each.
The acquisition, which is not expected to face issues with Hart-Scott-Rodino (HSR) antitrust improvements, is anticipated to finalize by the fourth quarter of 2024. However, Waste Management has the option to extend the closing deadline until June 3, 2026, should the only remaining condition be regulatory approval.
The transaction details reveal that using Stericycle's equity discount rate of 10%, the $62 deal price corresponds to a 30-Year Free Cash Flow (FCF) Compound Annual Growth Rate (CAGR) of 8.0%, based on the near-term FCF consensus estimate.
When applying Waste Management's equity discount rate of 8.0%, the implied CAGR is 5.8%, which is lower compared to Waste Management's own FCF CAGR of 8.7%, as per the current stock price.
The Stifel analyst has also removed Stericycle from the Stifel Select List in light of the acquisition agreement. This list typically includes stocks that the firm recommends for purchase, and the removal of Stericycle reflects the new status quo as the company is being acquired.
Investors and market watchers will be keeping a close eye on the progression of this deal, as it represents a significant consolidation in the waste management industry. The successful completion of the acquisition would integrate Stericycle into Waste Management's operations, potentially affecting the market dynamics and future financial projections for both companies.
In other recent news, Stericycle reported an increase in adjusted earnings per share and adjusted EBITDA in Q1 2024, despite a decrease in revenue. The company launched the Shred-it ProtectPLUS service, aimed at enhancing customer retention and cash flow.
On another note, Stifel reiterated its Buy rating on Stericycle, amidst potential acquisition talks with Waste Management, Inc. The proposed acquisition, valued at approximately $7 billion, would represent an 18.4% increase over Stericycle's most recent closing share price.
The deal's estimated value suggests a per-share price near $61, taking into account Stericycle's net debt of around $1.4 billion. The acquisition multiple based on the deal is approximately 14.8 times the forecasted pre-synergy earnings before interest, taxes, depreciation, and amortization (EBITDA) for the fiscal year 2024. These are recent developments that investors are closely monitoring.
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