Recognized for distinctive renewable energy projects worldwide, Covanta Holding Corporation (NYSE: CVA, CVA message board) has moved to expand its portfolio of Energy-from-Waste (EfW) operations through a recently announced definitive agreement to purchase Montenay International, a North American group of seven EfW ventures belonging to a French company, Veolia Environnement (NYSE: VE). Facilities listed for the acquisition are located in California, Florida, New York, Pennsylvania and Canada – all of them holding long-standing contracts with relevant municipal customers. Both parties have agreed on a settlement price of $450 million in cash, not counting debt assumption. This sum, as maintained by Veolia, is almost ten-fold the earnings before interest, taxes, depreciation, and amortization for fiscal 2008 for Montenay.
Covanta is banking on the overall capacity of the operation to handle three million tons of waste annually, thereby generating an additional $60 million of cash flow by 2010, when the deal is expected to be completely closed. Already the company runs 38 similar facilities with a combined operational ability to process just about 17 million tons of solid waste per year.
Commenting on the expansion, Covanta president and CEO, Anthony Orlando said the acquisition is consistent with the company’s “growth strategy targeting Energy-from-Waste development projects and acquisitions in key markets”. The statement also stated that the acquisition and integration of these operations is not expected to result in job losses among the 500 employees at the various facilities.
The finalization of the transaction could be arrived at in stages and depends on Covanta's ability to obtain particular approvals, the failure of which may lead to a subtraction of previously specified concerns from the transaction, plus a justly due markdown.
On the NYSE market on Tuesday, the share price of Veolia closed at $28.98, on the back of a firmer close of $29.63. At the same time, CVA stock dropped four cents to close at $16.64.
Reference:
http://www.veolia.com/en/default.aspx?nointro=1
http://www.covantaholding.com/
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