Waste Management, Inc. (WM) Misrepresented the Regulatory Antitrust Review of the Merger between It and Advanced Disposal Systems, Inc.
A shareholder filed a class action on behalf of investors who purchased certain Waste Management, Inc. (NYSE: WM) redeemable senior notes (the “Notes”) between February 13, 2020 and June 23, 2020, for violations of the Securities Exchange Act of 1934. The Notes include the following senior redeemable notes issued by WM in May 2019: (i) 2.95% Senior Notes due 2024; (ii) 3.20% Senior Notes due 2026; (iii) 3.45% Senior Notes due 2029; and (iv) 4.00% Senior Notes due 2039. Waste Management, Inc., through its subsidiaries, provides waste management environmental services to residential, commercial, industrial, and municipal customers in North America.
According to the complaint, on April 14, 2019, WM entered into an agreement and plan of merger (the “Merger”) to acquire Advanced Disposal Systems, Inc. (“ADS”) for $4.9 billion, or $33.15 per share. The Merger was conditioned upon an ADS shareholder vote and obtaining antitrust clearance from regulators, including the U.S. Department of Justice (“DOJ”).
Beginning in February 2020, WM began touting the anticipated closure of the Merger, expressing in its Form 10-K filed with the SEC for the year ended December 31, 2019, that “[w]e anticipate that we will obtain antitrust regulatory approval by the end of March 2020 and close the Advanced Disposal transaction soon thereafter.” Then, on March 19, 2020, WM filed a current report on Form 8-K, which stated the Merger was expected to receive regulatory approval and close “in the second quarter of 2020” rather than the first. As a result of the disclosure, the price of the Notes fell. However, defendants continued to assure shareholders that they were working “with the Department of Justice and expect to close within the original 12 to 15-month timeline as we originally guided … Everything is progressing as expected.”
Plaintiff alleges that defendants, through these assurances, omitted material facts relating to: (i) the DOJ’s indication to WM that it would require WM to divest significantly more than $200 million; and (ii) the impact of the DOJ’s indication on the completion of the Merger and the redemption of the Notes.
On June 24, 2020, WM disclosed that the Company and ADS had revised the terms of the Merger and that WM needed to divest substantially more assets than previously disclosed to receive DOJ approval for the deal. Under the revised Merger terms, WM agreed to purchase ADS for $4.6 billion, or $30.30 per share, thereby reducing WM’s acquisition cost by approximately $300 million to $4.6 billion. In addition, WM and ADS had agreed to sell $835 million worth of assets in an attempt to satisfy antitrust regulators, which assets were responsible for generating approximately $345 million in 2019 revenue. WM also revealed that the deal was now not expected to close until “the end of the third quarter of 2020” – six months later than had been represented by defendants at the start of the class period and, critically, after the end date which triggered the redemption feature of the Notes. On this news, the prices of the Notes fell significantly. For example, the 3.45% Notes fell from 109% on June 23, 2020 to just 103% of par on June 24, 2020.
Next Steps: If you acquired Waste Management, Inc. (WM) Notes February 13, 2020 and June 23, 2020, you have until August 8, 2022, to ask the court to appoint you lead plaintiff for the class. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. You do not have to participate in the case to be eligible for a recovery.
All representation is on a contingency fee basis. Shareholders pay no fees or expenses.