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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
March 11, 1998
Date of Report (Date of earliest event reported)
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WASTE MANAGEMENT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-7327 36-2660763
(Commission File Number) (IRS Employer
Identification No.)
3003 BUTTERFIELD ROAD, OAK BROOK, ILLINOIS 60523
(Address of principal executive offices) (Zip code)
(630) 572-8800
(Registrant's telephone number, including area code)
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Item 5. Other Events.
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On March 11, 1998, the registrant and USA Waste Services, Inc. jointly
issued a press release announcing that the registrant and USA Waste Services,
Inc. have signed a definitive agreement to merge. Consummation of the
transaction is subject to expiration or termination of the applicable
Hart-Scott-Rodino waiting period, approval of the merger by the shareholders of
each company and other closing conditions. A copy of the press release
containing this announcement and a copy of the merger agreement are filed
herewith as an exhibits and incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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No financial statements or pro forma financial information are required to
be filed as a part of this report. The exhibits filed as part of this report are
listed in the Exhibit Index hereto.
2
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WASTE MANAGEMENT, INC.
By: /s/ Donald R. Chappel
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Donald R. Chappel
Vice President and Acting Chief
Financial Officer
Dated: March 12, 1998
3
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WASTE MANAGEMENT, INC.
EXHIBIT INDEX
Number and Description of Exhibit*
1. None
2. Agreement and Plan of Merger among USA Waste Services, Inc., Dome Merger
Subsidiary, Inc. and the registrant, dated as of March 10, 1998
(incorporated by reference to Exhibit 99.1 of the Form 8-K Current Report
of USA Waste Services, Inc. dated March 10, 1998 (Securities and Exchange
Commission File No. 1-12154))
4. None
16. None
17. None
20. None
23. None
24. None
27. None
99 News Release dated March 11, 1998 issued jointly by Waste Management, Inc.
and USA Waste Services, Inc.
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*Exhibits not listed are inapplicable.
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EXHIBIT 99
Contact: For Waste Management: For USA Waste:
Cherie Rice, Analysts Lew Nevins
(630) 218-1850 (713) 512-6228
William J. Plunkett, Media
(630) 572-8898
For Immediate Release
WASTE MANAGEMENT AND USA WASTE AGREE TO MERGE
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-- Transaction Expected To Be Accretive To Both Companies' Shareholders And To
Accelerate Earnings Growth --
-- Operating Earnings Of Combined Company
Expected To Be $2.90 - $3.05 Per Share In 1999;
$3.55 - $3.70 Per Share In The Year 2000 --
OAK BROOK, ILLINOIS, AND HOUSTON, TEXAS, March 11, 1998 -- Waste Management,
Inc. (NYSE: WMX) and USA Waste Services, Inc. (NYSE: UW) today announced that
they have signed a definitive agreement to merge.
In the merger, which has been approved unanimously by the boards of both
companies, each share of Waste Management will be exchanged for 0.725 shares of
USA Waste common stock (or 345 million USA Waste shares), resulting in a total
of approximately 565 million outstanding shares for the combined company, after
adjusting for approximately 20 million pooling-related shares to be issued by
Waste Management prior to the merger. Waste Management shareholders will own
approximately 60 percent of the combined enterprise, which at yesterday's
closing stock prices would have an aggregate equity market capitalization in
excess of $20 billion. The transaction will be tax free to shareholders and is
intended to be accounted for as a pooling of interests.
The parties expect to achieve annual cost savings of at least $800 million
through operating synergies and enhanced efficiencies. Excluding costs directly
related to the merger, the transaction is expected to be accretive to both
companies' operating earnings
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for 1999 and the long term. Operating earnings for the combined company in 1999
are currently expected to be in the range of $2.90 to $3.05 per share.
"In one stroke we are delivering to Waste Management and its shareholders the
ideal senior management team, while at the same time creating a new vehicle for
long-term growth," said Robert S. Miller, who has served as acting chairman and
chief executive officer of Waste Management, Inc. since October and was elected
chairman and chief executive officer on Tuesday. He will serve as non-executive
chairman of the combined company.
USA Waste Chairman and CEO John E. Drury, who will be CEO of the new company,
said, "This merger is about creating value for both companies' shareholders. An
essential result of the transaction is its expected accretion to USA Waste's
shareholders. We intend to move swiftly to apply our operating strategy to the
combined company. That strategy has allowed us to provide superior service to
our customers while maintaining the lowest costs and the highest profit margins
in the industry.
"The merger also represents an excellent platform from which to pursue future
growth," Mr. Drury added. "We anticipate the cost savings coupled with expected
strong revenue growth to allow the combined company's operating earnings to grow
at a rate in excess of 20 percent for the next several years."
The new company will benefit from a management and corporate governance
structure that melds the talents of the two organizations:
. Mr. Miller will serve as non-executive chairman of the board of directors of
the new company.
. Mr. Drury will serve as chief executive officer and chairman of the board's
executive committee.
. USA Waste President and Chief Operating Officer Rodney R. Proto will serve as
president and COO and as a director.
. Earl E. DeFrates, USA Waste's chief financial officer, will serve as
executive vice president and CFO.
. Additional members of the new senior management team will be drawn from the
best of both companies.
. The new company will be governed by a board of directors consisting of an
equal number of members designated by each company's current board.
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. Roderick M. Hills, a current member of Waste Management's board, will serve
as chairman of the board's audit committee. Mr. Hills is a former chairman of
the U.S. Securities and Exchange Commission.
. Jerome B. York, a current member of USA Waste's board, will serve as chairman
of a special integration committee overseeing achievement of cost savings and
synergies. Mr. York is vice chairman of Tracinda Corporation and a former
chief financial officer of IBM Corporation and Chrysler Corp.
. USA Waste President and COO Rod Proto and Waste Management Executive Vice
President and COO Joseph Holsten will serve as co-chairmen of a special
management committee designated to oversee the transition.
. The new company will be named Waste Management, Inc. and will be based in
Houston. It will also maintain offices in Oak Brook, Illinois.
"This transaction is driven by the tremendous cost savings available to the
combined company and the growth opportunity arising from creating the world's
largest solid waste company," Mr. Drury said. "These savings will come from
consolidating routes, eliminating duplicate facilities, utilizing transfer
stations and disposal facilities more cost-effectively, and streamlining
corporate and support functions.
"We are delighted to bring someone of Jerry York's talents to this process as
chairman of the board's Special Integration Committee," Mr. Drury continued.
"Realization of these savings, along with our growth strategy, will make the new
company a powerful cash-generating engine. These strong cash flows will give us
maximum flexibility for creating continuing shareholder value."
Mr. Miller stated, "After carefully reviewing a wide variety of strategic
alternatives available to Waste Management at this critical juncture in its
history, our board of directors determined that a strategic combination with USA
Waste is in the best interest of our shareholders. The transaction is expected
to be accretive to our shareholders in the near and long term.
Mr. Miller continued, "We have been looking for a dynamic, creative and
experienced CEO to lead our company. We found that person in John Drury. The
Waste Management board is confident that the combined company's corporate and
field management team drawing the best of the best from both companies -- will
have the talent, commitment and enthusiasm needed to make this merger an
unqualified success.
"We are particularly impressed by the significant personal investments that John
Drury, his colleagues in senior management and the board of USA Waste have in
their company. They clearly have a strong incentive to deliver outstanding
results to the combined company's shareholders."
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Mr. Drury added, "Waste Management has long been a leader in this industry and
is particularly distinguished by its dedicated and talented work force. I am
looking forward to the exciting task of combining the two companies' strengths
to create the outstanding waste services company of the next century."
Consummation of the transaction is subject to expiration or termination of the
applicable Hart-Scott-Rodino waiting period, approval of the merger by the
shareholders of each company, and other customary closing conditions. The
transaction is expected to be completed by the fall of 1998.
Donaldson, Lufkin & Jenrette served as financial adviser to USA Waste and
Merrill Lynch served as financial adviser to Waste Management.
Waste Management, Inc., based in Oak Brook, Illinois, is the leading
international provider of comprehensive waste management services. The Company
operates throughout the United States and in select international markets
through its principal subsidiaries, Waste Management, Wheelabrator Technologies
and Waste Management International.
USA Waste, based in Houston, is an integrated, non-hazardous, solid waste
management company currently serving municipal, commercial, industrial and
residential customers in 48 states, the District of Columbia, Canada, Puerto
Rico and Mexico.
Except for historic data, the information contained herein (including the
accompanying schedules) constitutes forward-looking statements. Forward-looking
statements are inherently uncertain and subject to risks. Such statements should
be viewed with caution. Actual results or experience could differ materially
from the forward-looking statements as a result of many factors, including the
ability of the Companies to meet price increase and new business sales goals,
fluctuation in recyclable commodity prices, weather conditions, slowing of the
overall economy, increased interest costs arising from a change in the
Companies' leverage, failure of the Companies' plans to produce anticipated cost
savings, the timing and magnitude of capital expenditures, inability to obtain
or retain permits necessary to operate disposal or other facilities or otherwise
complete project development activities, inability to complete contemplated
dispositions of the Companies' businesses and assets at anticipated prices and
terms, and the cost and timing of stock repurchase programs. The Companies make
no commitment to disclose any revisions to forward-looking statements, or any
facts, events or circumstances after the date hereof that may bear upon forward-
looking statements.
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BIOGRAPHICAL INFORMATION
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Robert S. (Steve) Miller
Mr. Miller, 56, joined Waste Management in October 1997 as acting chairman and
chief executive officer. He joined the company's board of directors in May 1997.
Most recently he served as acting chief executive officer of Federal Mogul
Corporation. Before that he was recruited to serve as chairman of Morrison
Knudsen Corporation in a critical period of restructuring after the resignation
of Chairman and CEO William Agee between April 1995 and September 1996 after
which he became vice chairman. He has also been a senior partner at James D.
Wolfensohn, Inc., an investment bank specializing in corporate strategy. Mr.
Miller's first major experience with corporate turnarounds was at Chrysler
Corporation, where he was a key negotiator of the company's innovative financial
restructuring with the federal government and served as its chief financial
officer and vice chairman.
John E. Drury
John E. Drury, 53, has been chairman of the board of USA Waste since June 30,
1995 and chief executive officer and a director of the company since May 27,
1994. Mr. Drury served as a managing director of Sanders Morris Mundy Inc., a
Houston-based investment banking firm from 1991 to May 1994. Mr. Drury served
as president and chief operating officer of Browning-Ferris Industries, Inc.
from 1982 to 1991, during which time had chief responsibility for all solid
waste operations.
Rodney R. Proto
Rodney R. Proto, 49, has been president, chief operating officer and a director
of USA Waste since joining the company in August 1996. Prior to joining USA
Waste, Mr. Proto was president, chief operating officer and a director of
Sanifill, Inc. since February 1992. Previously, Mr. Proto was employed by
Browning-Ferris Industries for twelve years where he served, among other
positions, as president of Browning-Ferris Industries Europe, Inc. from 1987
through 1991 and chairman of BFI Overseas from 1985 through 1987.
Earl E. DeFrates
Earl E. DeFrates, 54, has been executive vice president and chief financial
officer of USA Waste since May 1994. From October 1990 to April 1995, he was
also secretary. Mr. DeFrates joined USA Waste as vice president - finance in
October 1990 and was elected executive vice president in May 1994. Earlier, Mr.
DeFrates was employed by Acadiana Energy Inc. (formerly Tatham Oil & Gas, Inc.),
serving in various officer capacities including as the company's chief financial
officer since 1980.
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Joseph M. Holsten
Joseph M. Holsten, 45, executive vice president and chief operating officer,
joined the company in 1981 and has served in various management positions in
Waste Management, Inc.'s North American and international operations. Mr.
Holsten is responsible for all operating units of Waste Managment, Inc. Prior
to his present position, Mr. Holsten was chief executive of Waste Management
International plc and is a member of its board. Prior to working for Waste
Management, Mr. Holsten was staff auditor at Coopers & Lybrand in Tucson,
Arizona, and senior operational auditor at Talley Industries in Mesa, Arizona.
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KEY FACTS
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Waste Management
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Headquarters: Oak Brook, Illinois
Employees: 58,800 worldwide (37,000 in U.S.)
1997 Revenues: $9.2 billion
USA Waste Services
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Headquarters: Houston, Texas
Employees: 17,700
1997 Revenues: $2.6 billion
<TABLE>
COMBINED ASSETS -- NORTH AMERICA
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<S> <C>
Landfills:
USA Waste 182
Waste Management 137
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Total 319
Collection Operations:
USA Waste 250
Waste Management 400
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Total 650
Transfer Stations:
USA Waste 175
Waste Management 164
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Total 339
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</TABLE>
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FINANCIAL INFORMATION
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<TABLE>
<CAPTION>
OPERATING STATISTICS AND ACCRETION ANALYSIS
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($ in millions, except EPS) 1998P 1999 2000
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<S> <C> <C> <C>
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Revenue $ 12,500 $ 13,800 $ 15,300
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EBITDA 4,600 5,300 6,100
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USA Waste EPS Street Estimates $ 2.15 $ 2.60 $ 3.20(1)
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Expected Accretion/(Dilution) Impact (less than) 10% (less than) 10% (less than) 10%
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Operating EPS $2.35 - $2.50 $2.90 - $3.05 $3.55 - $3.70
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Synergies Assumptions $800 million $800 million $800 million
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(1) Based on IBES long-term growth
estimates
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<CAPTION>
COMPARATIVE FINANCIAL STATISTICS
(YEAR ENDED 12/31/97)
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Waste Pro Forma
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USA Waste Management Merger(1)
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<S> <C> <C> <C>
% of Revenues
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EBITDA 37.6% 27.1% 36.2%
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EBIT 26.0 15.2 24.4
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Net Income 13.7 4.7 10.6
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(1) Includes full year impact of $800 million in synergies.
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<CAPTION>
KEY PRO FORMA FINANCIAL STATISTICS
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($ in millions)
At December 31,
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1997P 1998P
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<S> <C> <C>
Balance Sheet:
Total Net Debt $10,300 $8,400
Total Equity(1) 5,100 6,700
Total Net Debt/Total Capitalization 67% 56%
EBITDA: $ 4,300 $4,600
Credit Statistics:
Net Debt/EBITDA 2.4x 1.8x
EBITDA/Gross Interest 6.9 7.5
(1) Includes minority interest.
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