Editor's Focus

Swallowed by the Whale

The purchase of Star Services Group, parent company of Delta Recycling, the United States’ largest C&D recycling company, by Allied Waste Industries is obviously interesting for a few reasons.

First is the franchise issue, as Star was in the forefront fighting the major haulers’ control of the lucrative C&D waste stream, especially in the South Florida territory Star worked in. Did Allied buy them out to shut them up, or will the big waste company keep on recycling with the former Delta plants? While only the future will tell, the approximately $50 million price Allied paid is a lot of money just to shut down the recycling operations, all while the state of Florida is pushing for more recycling of C&D.

The other interesting part is the purchase of an independent company by a large conglomerate. Fifteen to 20 years ago the waste industry and the natural aggregate industry were both very fragmented, not as much as the C&D recycling industry is now, but pretty close. Then came consolidation and buying sprees in both industries, and while there are still a lot of independents out there, much of the market is concentrated in fewer players’ hands.

Now it’s time to see if it is C&D recyclers’ turn. Last year R.I. Busse Inc., a large Chicago-area concrete recycler, sold out to Vulcan Materials, the largest natural aggregate producer in the United States. Now Star has been bought by Allied. Will this continue? Can the independents hold out against the consolidation? Should they? Each sale in an area gives the big company more leverage and market power against the smaller companies.

As they are picked off, it becomes more difficult for the remaining independents to remain economically viable because the big company can use its position to an advantage. Usually the owners of the first company or two to sell out to the big company in a market area are the ones to make the most money. The others may later be desperate and have to sell, which puts them in a weakened bargaining position. This may not be pleasant, but it is a fact of business life.