Waste Management Announces Acquisition of Medical Waste Specialist Stericycle for $62 Per Share

Following rumors that narrow-moat-rated Stericycle was the target of takeover interest (see our May 24 Stericycle analyst note), Waste Management and Stericycle announced on June 3 that the two firms have entered into a definitive agreement in which WM will acquire Stericycle for $62 per share, or an enterprise value of $7.2 billion. This valuation represents an enterprise value/adjusted 2024 EBITDA multiple of about 15. That said, Stericycle is in the midst of a turnaround, and we believe the firm is still underearning its potential. Prior to this announcement, we had modeled Stericycle's adjusted EBITDA margin to improve from roughly 17.5% in 2024 to 23.5% by 2028. However, WM is targeting $125 million in synergies, which we think is an achievable target. Including these synergies, our forecast 2028 EBITDA margin for Stericycle increases to 27.5%.