Casella Selling Non-Integrated Recycling Assets to Private Equity Firm

Casella Waste Systems Inc. has reached a definitive agreement to sell select non-integrated recycling assets to CE Holdings for $130.4 million. The new company was formed by Pegasus Capital Advisors, L.P. and Intersection LLC.

In a release announcing the sale, Casella says that the assets to be sold contributed $14 million consolidated adjusted EBITDA for the twelve months ended Oct. 31, 2010.

With the sale, Casella's business strategy will focus on its integrated solid waste, recycling, and resource transformation business throughout the Northeastern United States.

"With this important transaction, we will have made substantial progress towards our objective to delever the balance sheet," says John Casella, chairman and CEO of Casella Waste Systems. "At the same time, we will be simplifying our business structure, improving our risk profile, and, most importantly, maintaining a strong set of integrated solid waste, recycling and resource management assets across the Northeast."

"Our strategy to sell non-core assets to reduce leverage and improve our balance sheet over the past several quarters is the right plan to drive long-term shareholder value," Casella adds. "This attractive transaction is aimed at achieving these goals, and we believe that with this transaction we will be better positioned for the future, with a stronger balance sheet and a solid operating platform."

"We will continue to focus on deleveraging our balance sheet towards our stated long term leverage target, and focus on increasing our cash flows from operations by profitably growing revenues, increasing pricing, implementing permanent cost controls and operating efficiency programs, and harvesting our successful landfill development initiatives," Casella says. "The sale of these assets will have no effect on our continued commitment to provide our customers with innovative resource solutions that create incremental value from traditional waste streams."

The purchaser is financed by Pegasus Capital Advisors L.P., MissionPoint Capital Partners LLC, HarbourVest Partners LLC and Ares Capital Corp. Craig Cogut, founder and managing partner of Pegasus Capital Advisors, L.P., will serve as chairman of the new company.

CE Holdings, will serve as a strategic platform focused on the recovery of waste and community resources, and transforming refuse into value-added recycled products.

In announcing the acquisition of Casella’s non-core assets, CE Holdings says it plans on securing intellectual property that includes patents and publications related to the use of optical sorting for material characterization in recycling streams, MRF automation, and the production of engineered feedstock from a waste stream. In the future, this technology will allow CE Holdings to take full waste streams, separate recyclables, and transform remaining waste into marketable products.

"Looking forward, we have the chance to revolutionize the waste management and recycling industry," says Jim Bohlig, CE Holding's CEO. "The ability to accept full waste streams and engineer valuable products from refuse will change the way we all think about waste."

"The opportunity to positively impact the communities we serve is the reason we exist," says Sean Duffy, president and CEO of CE Holdings. "We see the future of America's communities as clean, independent, resilient, and maximizing the use of their own resources. Our team is energized and focused on serving our communities with a combination of innovative technology and 25 years of experience."

Pursuant to the purchase and sale agreement and related agreements, Casella will divest its FCR recycling assets located outside of its core operating region of New York, Massachusetts, Vermont, New Hampshire, Maine and northern Pennsylvania, including 17 Material Recycling Facilities (MRFs), 1 transfer station and certain related intellectual property assets.

Following the transaction, Casella will retain 4 integrated FCR MRFs located in its core operating region.

Closing of the transaction is expected to be in the fourth quarter of fiscal year 2011 and is subject to customary closing conditions. At the closing of the transaction, Jim Bohlig, a Casella officer and board member, will join the buyer as the CEO.