Dive Brief:

• Coastal Waste & Recycling recently acquired Florida-based Southwest Waste, according to a Monday release. Financial terms were not disclosed.
• Southwest offers a range of C&D collection, recycling and disposal services, primarily in western Florida. CEO Charles Lomangino founded the company in 2021.
• This is the largest acquisition to date for Florida-based Coastal, which also operates in Georgia and South Carolina. Coastal is a portfolio company of Macquarie Asset Management.

Dive Insight:

Coastal, itself a young company founded in 2017, has sought to scale quickly since Macquarie purchased a majority stake last year. This transaction, initially reported by Construction & Demolition Recycling, is a notable expansion of its position in Florida.

“The merger of Coastal and Southwest represents a collaboration of two exceptional entities, with a shared commitment to the development and growth of both their business and their people,” said Coastal CEO Brendon Pantano in a statement.

According to a Sept. 24 rating report from Moody’s, Coastal had an estimated 1,250 employees and 700 vehicles prior to the transaction. The company operates a range of MSW and C&D services across dozens of locations in the Southeast.

During a WasteExpo session in May, Pantano said Coastal had 8 MRFs, four transfer stations and one C&D landfill. At the time, he estimated Coastal was generating around $400 million in annual revenue.

Lomangino, speaking during the same panel, estimated Southwest generated $100 million in annual revenue. He estimated the company had 350 employees at the time and more than 60 trucks. Southwest operates seven facilities, including multiple with C&D processing and concrete crushing capabilities. The company’s website lists locations in areas of Florida such as Naples, Fort Myers, Sarasota and Port Charlotte.

“Our entire team is excited to be joining Coastal. Our values, culture and entrepreneurial spirit are fully aligned,” said Lomangino in a statement.

The Lomangino family has decades of experience in the New York and Florida waste markets, including the formation and sale of various companies. According to a Waste Advantage profile, Lomangino started his own portable toilet and roll-off container business after college. Those assets were later combined with Southern Waste Systems, which was founded by his father, Anthony Lomangino, in 2008. WM acquired Southern and affiliated company Sun Recycling in 2016.

Lomangino previously described Florida as having a more favorable C&D market than New York.

“[Y]ou're seeing a tremendous amount of construction, new construction. You're seeing population growth. As opposed to, say, some areas in the Northeast. We have businesses on Long Island that on the C&D side are not growing as fast,” he said during WasteExpo.

According to S&P, Coastal’s purchase of Southwest was funded in part by a $225 million revolving credit facility due in 2029 and a $610 million term loan due in 2031. Macquarie also contributed an unspecified amount of equity. S&P gave the facilities a BB- rating. It assigned an overall B+ rating to Coastal’s parent company, Tidal Wase & Recycling Holdings. Moody’s assigned a B2 rating to Tidal, as well as the related credit facilities.

The ratings are below investment grade, but the two entities largely described Coastal’s current financial position as a function of its aggressive growth strategy.

The ratings reports noted solid recurring revenue, including from numerous franchise contracts, and projected future profitability. S&P highlighted “above average” earnings before interest, depreciation and amortization margins, which Moody’s estimated to be around 25%, due to Coastal’s focus on the more profitable C&D category.

Each report noted a debt-to-EBITDA ratio in the roughly 4x to 5x range, with Moody’s projecting it could drop to at least 4.5x by the end of 2025. The reports noted negative free cash flow due to near-term investments and acquisitions.

Last year, Coastal also purchased companies including Pro Disposal in South Carolina and others in Florida.

Moody’s estimated that Coastal could see positive free cash flow in the $10 million to $20 million range over the next year, as well as 3% organic topline growth in 2025 due, in part, to pricing actions. It also noted the likelihood for “growth through additional acquisitions.”

Disclosure: WasteExpo is run by Informa, the owner of Waste Dive’s publisher, Industry Dive. Informa has no influence over Waste Dive’s coverage.