On Wednesday, Swedish private equity investor EQT, which manages more than EUR 67 billion (about $79 million) in client assets across real assets and other private market strategies, announced that it is buying Covanta, an owner-operator of Waste-to-Energy (WtE) facilities throughout North America.
Under terms of the deal, shareholders will receive $20.25 in cash per share of Covanta’s common stock in a transaction valuing Covanta at $5.3 billion, including net debt obligations. The purchase price represents a 37 percent premium to Covanta’s unaffected share price of $4.86 on June 8th, the day prior to initial media speculation of a transaction.
Per EQT, Waste-to-Energy is a vital part of the waste disposal value chain, offering a more sustainable alternative to landfilling waste for communities and businesses, and with a significantly smaller real estate footprint per ton disposed compared to traditional landfills.
The process ensures optimal use of waste by reducing waste volumes by 90 percent that would be otherwise landfilled; eliminating approximately one ton of greenhouse gas (equivalent) per ton of municipal solid waste; producing sustainable, highly reliable electricity, capacity, and steam for utilities and industrial customers; and recycling metals found within municipal solid waste.
New Jersey-based Covanta has 41 WtE facilities strategically located in key metropolitan areas across the U.S., Canada and Europe. Each year, the company converts approximately 21 million tons of waste into sustainable, reliable electricity and produces around 10TWh of baseload electricity and around 600,000 tons of recycled metals per year. Covanta’s three segments comprise waste processing and services, energy production and metals recycling.
The company is expected to generate adjusted EBITDA of approximately $460 million to $480 million in 2021.
“EQT and Covanta are proven business leaders who share a like-minded approach to environmental stewardship, and this acquisition aligns directly with EQT’s thematic approach of investing in sustainable businesses that have a positive impact on society,” EQT Infrastructure Partner Alex Darden said. “EQT is excited to partner with the entire Covanta team and to invest in organizational, operational and digital technology initiatives that will enhance Covanta’s ability to provide sustainable solutions to growing waste challenges. As a responsible investor, EQT is committed to working with Covanta on transforming and supporting the energy transition and circular economy across its local communities.”
EQT says its purpose-driven investment model presents several growth opportunities for Covanta, whose business centers on sustainable waste processing and advancing transitions to a circular economy. Under EQT’s ownership, Covanta will continue to differentiate its service offerings, with a focus on innovation and sustainable energy. EQT says it is committed to growing Covanta’s team, realizing near-term operational upgrades, enhancing customer partnerships and building “greater trust and understanding” with the communities that Covanta serves.
“We are pleased to announce this agreement with EQT,” Covanta President and CEO Michael Ranger said. “ Our comprehensive analysis during the past nine months has been singularly focused on enhancing value for our shareholders. EQT certainly recognizes the value we see in our business and represents an excellent outcome of our strategic review. Furthermore, as an organization dedicated to sustainability and environmental stewardship, EQT shares our vision for a safer, cleaner and more prosperous future through sustainable waste management thereby ensuring no waste is ever wasted. We couldn’t ask for a better partner as we embark on this next phase of our company’s evolution, delivering on our goal of building a sustainable future for all stakeholders.”
The transaction is expected to close by year end, subject to customary approvals.