Dive Brief:

• LRS this week acquired numerous collection, transfer and disposal assets from GFL Environmental in Illinois and Minnesota. LRS CEO Alan Handley described it as the company's largest deal to date and said an estimated 100 employees will be joining as a result.
• In Illinois this includes everything GFL acquired in the Waste Management-Advanced Disposal Services divestiture package — namely three transfer stations — except for the Zion Landfill. It also includes Prairieland Disposal & Recycling Services, which holds 16 municipal contracts across Lake and McHenry counties.
• In Minnesota, LRS acquired the Rolling Hills Landfill, one transfer station in Rochester and a collection operation in St. Cloud. These assets are seen as complementary to existing operations, including the summer acquisition of Minneapolis-based Atomic Recycling.

Dive Insight:

Just as GFL is doubling down on its own Midwest platform with Friday's acquisition of PDC, LRS also has its sights set on becoming a major player in the region. Recent backing from a Macquarie Asset Management fund positions the Illinois-based private company to get even more active with M&A going forward.

This latest deal includes the sale of multiple Chicago-area items in the Waste Management-Advanced package that LRS was highly interested in getting for itself as terms were worked out from 2019 into 2020. Wisconsin divestitures were also considered particularly attractive, as LRS already had a presence in the state. That ultimately didn't happen, as the U.S. Department of Justice was reportedly interested in working with one buyer for the divestitures rather than multiple, but in the end LRS won out.

"It's just a matter of being patient," said Handley. "We had developed a good relationship with [CEO Patrick Dovigi] and GFL and we worked very well together in Wisconsin."

The Chicago area outcome has been of particular interest to regional professionals, including some who believe more should have been done to preserve market competition after GFL won the Advanced package but didn't get any local collection assets to establish its presence.

In December 2020, following the Waste Management-Advanced agreement, the Solid Waste Agency of Northern Cook County and Solid Waste Agency of Lake County advocated for the federal government to take additional steps that preserved competition. The two agencies called for DOJ to either require that Waste Management divest additional collection assets to GFL, require Waste Management to sign a regional disposal agreement with GFL, or require GFL to divest the assets to LRS.

The DOJ disagreed, with a federal judge giving the deal final approval in May after finding, "GFL does not itself need to collect waste in order to run a successful waste disposal business in the Chicago area, as it can contract with others that collect that waste."

Now, LRS will end up gaining key transfer assets to build its regional collection business after all, with access to the Zion Landfill via a 10-year, 450,000 ton-per-year disposal agreement with GFL. The acquisition of Lake Barrington-based Prairieland, estimated to do more than $20 million in annual sales with a focus on McHenry County, is another key element of the deal. Handley described the opportunity to move into these northern Illinois counties as one of the transaction's highlights.

"It's a market that’s vastly underserved, very low competition and we didn’t have any physical assets up there," he said, adding that now LRS can go and "take a lot of market share."

Asked about its motivations to largely exit these parts of the Illinois market, while focusing on other areas via the PDC transaction, GFL's Dovigi pointed to a broader strategy.

"Historically, we have focused on the U.S. secondary markets rather than the primary, urban markets like Chicago, which are usually more crowded with competitors and more challenging to service," said Dovigi. "Given the footprint we now have our sole focus is investing in markets where we will get the highest returns on invested capital. The Chicago market fits in very well with LRS’ strategy and expanding footprint."

Following another recent sale of assets to Noble Environmental in the Pennsylvania area, this marks a conclusion for two of the most anticipated moves GFL was considering to shed non-strategic business from the Advanced divestiture package. GFL reported Friday proceeds from this year's U.S. assets sales totaled $122.5 million, including $72.5 million from the LRS transaction.

LRS describes itself as the fifth-largest private waste and recycling company in North America, with projected annual revenue of $375 million. The company currently operates in Illinois, Indiana, Iowa, Michigan, Minnesota and Wisconsin, and has plans to continue expanding throughout the greater Midwest region. It has also seen success in its original Chicago market this year, with the award of a major municipal recycling contract and acquisition of a sizable local hauler.

The company announced two other deals this week, the acquisition of Jackson Disposal in western Illinois and purchase of routes from Peterson Sanitation in southern Wisconsin. Handley expects multiple others to close by the end of the year.