In a blockbuster announcement yesterday, Waste Management has purchased Greenstar Recycling, the owner of a dozen materials recycling facilities (MRFs) in seven states. With the buyout solidifying Waste Management’s position as America’s largest processor of residential and commercial recyclables, Resource Recycling followed up with Bill Caesar, president of Waste Management Recycle America, to learn more.
Recycling industry players are interested in how the Greenstar assets will be integrated into WM’s massive materials recovery system. Caesar noted that there’s little redundancy created by the purchase, where an existing WM plant might be very near a Greenstar MRF. He said that no MRF closures were planned, although there is obviously “some redundancy in the back office,” which naturally occurs in such buyouts.
Caesar pointed out how each Greenstar location may differ in how it will fit into the WM system. He mentioned that WM is a supplier to some Greenstar locations, such as in Allentown and Pittsburgh, Pennsylvania. He does not envision any major problem in terms of supply to the former Greenstar MRFs because even though WM competes heavily with such firms as Republic Services, competitors in the recycling business often supply each other’s MRFs when it makes sense.
“We already use 100 MRFs operated by other companies,” said Caesar, adding that most of WM’s competitors use WM MRFs when it is economical. Waste Management plans to “leverage our own collection assets” in supplying the Greenstar plants, “but we’re not buying new trucks” to feed these sites, he said.
Caesar generally concurred with an assessment saying that the Greenstar acquisition validates the concept of the mega-MRF. A handful of the Greenstar facilities are among the largest in the industry, and several, such as the plants in Akron, Ohio and San Antonio, Texas, operate on a hub-and-spoke model by seeking tonnage from outlying areas.
Caesar generally agrees with the idea that fewer consolidation opportunities will exist in the future. The MRF industry is now dominated by integrated waste management companies, such as WM and Republic; by recycled paperboard producers seeking fiber supplies, such as RockTenn and Pratt Industries; and by ReCommunity, whose business model mostly focuses on operating MRFs in conjunction with local governments. “There really isn’t any MRF firm left out there with any scale,” he says.
Greenstar was launched by private investors. Several recycling industry analysts contend that Greenstar was probably sold at a loss. If so, is this a death knell for venture capital involvement in MRF operations? Caesar says “it’s hard to say. I can’t put myself in their shoes. But this is a cyclical business. But so is pulp and paper, where we’ve also seen a lot of venture-capital involvement. I think investor interest in recycling may bounce back.”
Caesar concluded by stating “this purchase shows our commitment to the recycling business. Our action clearly indicates we are in this for the long haul.”