BFI Canada Income Fund (TSX: BFC.UN) and IESI Corporation have jointly announced the execution of a $1.1 billion transaction agreement to combine the two companies, creating one of the largest non-hazardous solid waste management companies in North America.
The transaction, which has been approved by the boards of both companies, is expected to be immediately 12 per cent accretive to BFI Canada’s cash distributions per unit. BFI Canada anticipates that it will increase its annual cash distribution to $1.5708 per unit from $1.4025 following the closing of the transaction.
"The combination with IESI achieves one of BFI Canada’s key strategic objectives of establishing a meaningful and profitable presence in the approximately U.S. $42 billion non-hazardous solid waste management industry in the United States," said Keith Carrigan, BFI Canada president and CEO.
"The United States will provide BFI Canada with excellent growth potential given the attractive dynamics of the U.S. non-hazardous solid waste management industry and substantial opportunities for consolidation."
The transaction will substantially increase BFI Canada’s market capitalization to more than $1.5 billion (based on the closing unit price as of November 26, 2004), significantly enhancing BFI Canada’s liquidity and financial resources. The combined company will have pro forma revenues and EBITDA of $606.3 million and $187.2 million, respectively, for the twelve months ended September 30, 2004. These pro forma results exclude any effect from BFI Canada’s acquisition of Complete Disposal Services ("CDS"), which closed November 19, 2004.
IESI is one of the leading regional, non-hazardous solid waste management companies in the United States, providing collection, transfer, recycling, and disposal services in two geographic regions. IESI’s southern region consists of Texas, Louisiana, Oklahoma, Arkansas and Missouri. IESI’s northeast region encompasses New York, New Jersey, Pennsylvania and Maryland.
"As a result of the transaction, BFI Canada will own one of North America’s leading non-hazardous solid waste management businesses with efficient, low-cost operations, high internalization rates, regionally focused operations, and strong and growing cash flow characteristics," said Mr. Carrigan.
"The combined business will benefit from a solid base of exclusive, multi-year municipal solid waste collection contracts that support a predictable revenue stream, as well as improved customer and geographical diversification."
Mickey Flood, IESI founder, president and CEO, stated, "We serve more than 560,000 residential and 56,000 commercial and industrial customers in our two regions and are one of the top three service providers in the majority of our principal markets. Like BFI Canada, we have achieved a strong record of financial performance though our vertical integration, focus on achieving high rates of internalization in our market focused operations, and disciplined acquisition strategy."
The core senior management team of BFI Canada will continue to lead the combined business, and will be complemented by IESI’s experienced management team in the United States. Mr. Carrigan will continue as the CEO of the combined business, and Joseph Quarin, current CFO of BFI Canada, will remain in his current role. Mickey Flood, IESI’s founder and CEO, will become executive vice president and remain president and CEO of IESI, and Tom Cowee, IESI’s CFO, will become VP Integration.
Senior management of both BFI Canada and IESI have extensive experience in operating and improving the profitability of nonhazardous solid waste management companies and both teams have a demonstrated track record of successfully executing and integrating acquisitions. Mr. Carrigan and Mr. Flood each have over 25 years of industry experience. The combined management team will have a meaningful ownership interest in the fund.
The North American non-hazardous solid waste management industry has consistently demonstrated favorable growth trends, has recession-resistant characteristics, and offers significant opportunities for further consolidation.
"The fit between the two businesses is excellent," said Mr. Carrigan. "We intend to improve operational efficiencies and profit margins by adopting the best practices of both companies, while pursuing growth both internally and through accretive acquisition opportunities that exist in Canada and the United States. We are very confident that this transaction will create short and long-term value for our unitholders."
Under the Transaction Agreement, the fund will indirectly acquire 100 per cent of the common stock of IESI and BFI Canada and IESI will combine their businesses. The current equity investors in IESI will retain an approximately 39 per cent indirect interest in the fund. The transaction is expected to close on or before January 31, 2005 subject to several conditions, including unitholder approval and the receipt of all necessary regulatory approvals.
CIBC World Markets Inc. is engaged as financial advisor and exclusive agent to BFI Canada. BMO Nesbitt Burns Inc. and Credit Suisse First Boston LLC are engaged as financial advisors to IESI. HSBC Securities (Canada) Inc. acted as financial advisor to the Board of Trustees of BFI Canada and provided an independent fairness opinion in connection with the transaction.
The transaction will be funded, in part, from the proceeds of an offering of subscription receipts by the Fund, under a prospectus to be filed with Canadian securities regulatory authorities (see "Notes to Readers").
About IESI Corporation
IESI is one of the leading regional, non-hazardous solid waste management companies in the United States. IESI provides its services through a network of vertically integrated assets in 37 markets, including 43 collection operations, 23 transfer stations, 17 landfills, seven recycling facilities and a fleet of more than 780 collection vehicles. IESI believes it is among the top three commercial waste management providers in the majority of its principal service areas. IESI provides collection, transfer, disposal and recycling services in two geographic regions: its South Region, consisting of various service areas in Texas, Louisiana, Oklahoma, Arkansas and Missouri; and its Northeast Region, consisting of various service areas in New York, New Jersey, Pennsylvania and Maryland.
Since 1995, IESI has established a track record of successfully integrating newly acquired businesses. In 2003, IESI was the tenth largest service provider based on revenue in the approximately US$42 billion non-hazardous solid waste management industry in the United States, and would be the eighth largest provider after giving the full-year effect to IESI’s 2003 acquisitions. For the twelve months ended September 30, 2004, IESI had revenues of US$317.5 million and EBITDA of US$93.5 million. For more information on IESI, visit www.iesi.com
About BFI Canada
BFI Canada is a full-service waste management company providing nonhazardous solid waste collection, transfer, disposal and recycling services in the provinces of British Columbia, Alberta, Manitoba, Ontario and Quebec. It is one of the largest non-hazardous solid waste management companies in Canada, and provides solid waste collection, transfer, disposal and recycling services to customers in 19 markets. BFI Canada owns and operates three landfill sites, four transfer collection stations, eight recycling facilities, a landfill gas-to-energy facility, and operates one municipally-owned landfill site and one recycling facility. BFI Canada had consolidated revenues of approximately $183.3 million and EBITDA of $62.3 million for the twelve months ended September 30, 2004. The fund’s
units are listed on the Toronto Stock Exchange under the symbol BFC.UN. For more information
on the Fund, visit www.bficanada.com
For further information, please contact:
Joseph D. Quarin, Chief Financial Officer, BFI Canada Tel: 416-401-7722 Email: firstname.lastname@example.org
Thomas J. Cowee Senior Vice President, Chief Financial Officer and Treasurer, IESI Tel: 817-632-4005 Email: email@example.com
Anne MacMicken, Manager, Investor and Employee Relations, BFI Canada Tel: 416-401-7729 Email: firstname.lastname@example.org