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DHC to acquire American Ref-Fuel in $2-billion transaction

On February 1, 2005 Danielson Holding Corporation (AMEX:DHC) announced that it has signed a definitive agreement to...


On February 1, 2005 Danielson Holding Corporation (AMEX:DHC) announced that it has signed a definitive agreement to acquire American Ref-Fuel Holdings Corp. (ARC), an owner and operator of waste-to-energy (WTE) facilities in the Northeast United States. Danielson’s principal subsidiary, Covanta Energy Corporation (Covanta), is a leader in renewable energy and waste disposal in the United States, and the ARC acquisition will expand Covanta’s geographic reach in the attractive Northeast corridor.

Danielson will pay $740 million in cash for the equity of ARC and will assume the consolidated net debt of ARC, which as of September 30, 2004 was $1.2 billion ($1.5 billion of consolidated indebtedness and $0.3 billion of cash) resulting in an ARC enterprise value of approximately $2.0 billion. Ref-Fuel Holdings LLC (Ref-Fuel), an indirect subsidiary of ARC, had unaudited, pro forma Adjusted EBITDA of $275.5 million for the 12 months ended September 30, 2004, which excludes holding company expenses.

Subject to the receipt of regulatory approvals and required financing, the transaction is expected to close in the second quarter of 2005.

Danielson is purchasing ARC from DLJ Merchant Banking Partners and its affiliated co-investors, each managed by Credit Suisse First Boston’s Alternative Capital Division, and AIG Highstar Capital, L.P. and certain affiliates. AIG Highstar Capital, L.P. is a private equity fund sponsored by AIG Global Investment Group.

Leader in Waste-to-Energy (WTE)

Danielson’s primary business is the domestic waste-to-energy business of Covanta. Covanta is an internationally recognized owner and operator of waste-to-energy and power generation projects. Covanta currently operates 25 waste-to-energy facilities in 14 states, and processes approximately 31,000 tons of waste per day. The acquisition of ARC will add six WTE facilities in the northeastern United States that have a total waste processing capacity in excess of 13,000 tons per day, a waste procurement company, and two transfer stations in Massachusetts.

“This strategic acquisition enhances our core waste-to-energy business by integrating an organization with complementary skills and assets that will broaden our base of predictable revenue,” stated Anthony Orlando, Danielson’s Chief Executive Officer. Orlando continued, “Like Covanta, American Ref-Fuel has long demonstrated high operating standards and the ability to deliver reliable waste disposal service to customers. This acquisition makes excellent business sense for both companies and their clients.”

Danielson expects to achieve significant cost savings and other synergies as a result of the transaction. Cash savings estimated from a reduction in corporate overhead is expected to be between $15 million to $20 million per year, when fully phased in by the end of 2007. The company estimates one-time transition costs of approximately $20 million. Additionally, Danielson believes that it will be able to achieve significant operating efficiencies through a combination of scale and expanded use of its internal maintenance teams at the newly acquired plants.

About Danielson Holding Corporation

Danielson Holding Corporation is an American Stock Exchange listed company, engaging in the energy, financial services and specialty insurance businesses through its subsidiaries. Danielson’s charter contains restrictions that prohibit parties from acquiring 5% or more of Danielson’s common stock without its prior consent.
Danielson’s subsidiary, Covanta Energy Corporation, is an internationally recognized owner and operator of waste-to-energy and power generation projects. Covanta’s waste-to-energy facilities convert municipal solid waste into renewable energy for numerous communities, predominantly in the United States.

About American Ref-Fuel

American Ref-Fuel Holdings Corp.’s waste-to-energy business is operated through subsidiaries whose equity is held by two separate entities, MSW Energy Holdings LLC (MSW I) and MSW Energy Holdings II LLC (MSW II), both of which file periodic reports with the Securities and Exchange Commission.

Contact Lou Walters at 973-882-7260 or visit the company website at www.danielsonholding.com


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