*Update: WM’s Bill Caesar on the story behind the purchase, here.
In a move that will shape the recycling industry in many parts of the country, particularly in Texas, Waste Management has bought Greenstar Recycling and all of its assets.
Some say the move to sell Houston-based Greenstar Recycling, which operates 12 materials recovery facilities (MRFs) in seven states, was borne of a series of disappointing acquisitions and expansions by Greenstar. Financial terms of Waste Management’s acquisition were not released.
Greenstar Recycling, formerly known as Greenstar North America, was formed as a wholly-owned subsidiary by Dublin, Ireland-based NTR plc, an international developer and renewable energy and sustainable waste management operator, in 2006.
Following its formation, Greenstar grew in two ways: Its initial strategy was to buy existing recycling plants. For example, the company bought single plants in Ohio and Pennsylvania and the multi-plant chain of processing facilities owned by Des Moines, Iowa-based Mid-America Recycling.
The company then went from a buy-and-operate model to a build-and-operate system, when it spent millions in constructing huge plants in Ohio and Texas.
Recycling industry players say the Waste Management purchase is intriguing in several ways. By purchasing Greenstar’s 12 locations handling over 1.5 million tons of recyclables annually, the deal certainly solidifies Waste Management’s position as the country’s largest processor of residential and commercial recovered materials. And the purchase is strategically a “map filler” in that few of Greenstar’s plants compete against a nearby Waste Management facility.
The fact Waste Management would buy a non-integrated asset is also telling. Typically, the company has purchased integrated assets, such as a waste hauler that also has a landfill and a recycling plant. “This agreement is a pure play in recycling,” says one stock analyst, “and that is not a common strategy in the waste industry.”
The third telling issue, according to an executive at one of the U.S.’s largest paperboard companies, is that “this is all about Texas.” This executive says that per-capita fiber recovery levels in Texas remain below average. “With that state’s growing economy and weak recycling rate, being the big dog in Texas is a really smart and strategic move.”
Because of the locations of Greenstar’s MRFs in the Lone Star State, Waste Management is poised to have a commanding presence there. “The move is Waste Management buying recycling in Texas by buying the MRFs and their contracts,” said one waste management executive.
“Texas has enormous potential for material capture and STAR supports endeavors that increase the state’s recycling infrastructure,” said Maia Corbett, executive director of the State of Texas Alliance for Recycling (STAR). “We hope this will build upon the capabilities Greenstar was providing to recycling programs throughout the state.”
A stock analyst interviewed by Resource Recycling said that the Greenstar sale may have one negative effect on recycling’s growth. The firm is a creation of offshore venture capitalists who saw an opportunity in the booming American recycling industry. The analyst notes that “the sale may show that investors who desire a return on investment of 20 percent or 30 percent will be unhappy with recycling’s ROI levels. This sale may affect investor interest in the coming years.”
