DOJ requires Republic to divest assets to proceed with Santek acquisition

DOJ requires Republic to divest assets to proceed with Santek acquisition

The DOJ said that without the divestiture, the proposed acquisition would lessen competition in six local markets across the Southeast.

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The U.S. Department of Justice announced March 31 that Republic Services Inc., Phoenix, will be required to divest waste collection and disposal assets in five states in order to proceed with its acquisition of Santek Waste Services LLC, Cleveland, Tennessee. The department says that without the divestiture, the proposed acquisition would substantially lessen competition for small container commercial waste collection and municipal solid waste disposal services in six local markets across the southeastern United States.

The department’s Antitrust Division—along with the Alabama Attorney General—filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia to block the proposed transaction. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the competitive harm alleged in the department’s complaint.

“The waste collection and disposal services provided by Republic and Santek are essential services for businesses, municipalities and towns,” DOJ Antitrust Division Acting Assistant Attorney General Richard A. Powers says in a written statement. “Today’s settlement, which requires Republic and Santek to divest numerous facilities and assets in five states, will ensure that these customers continue to benefit from competition for these critical services.”

According to the complaint, Republic and Santek provide small container commercial waste collection and municipal solid waste disposal services. In each of the local markets alleged in the complaint, Republic and Santek compete against each other and are two of only a few significant providers of one or both of these essential services. The combination of the two companies would eliminate head-to-head competition between them and threaten the lower prices and better service that customers have realized from that competition, the DOJ notes in the statement.

The complaint further alleges that, in the Chattanooga, Tennessee, and northern Georgia area, the proposed acquisition would limit the ability of collection rivals to compete with the merged company’s collection operations. The combination of these two vertically integrated companies that are both strong in collection and disposal in this market would give the merged company an increased incentive and ability to weaken its collection competitors by raising the price of disposal, a key input for collection services. With limited alternative disposal options left in the market, collection rivals would have to incur higher disposal costs or cease their operations, thereby reducing competition in the collection market.

Under the terms of the proposed settlement, Republic and Santek must divest landfills, transfer stations, hauling locations, and waste collection routes in Alabama, Georgia, Tennessee and Mississippi to New York City-based Kinderhook Industries LLC, or to an alternate acquirer approved by the United States. Kinderhook is a private investment firm whose portfolio companies include Capital Waste Services LLC, Columbia, South Carolina, and EcoSouth Services of Mobile LLC, Axis, Alabama.

The proposed settlement also requires that Republic and Santek divest waste collection routes and associated assets in Texas to Waste Connections Inc., Ontario, or to an alternate acquirer approved by the United States. WCN is a provider of small container commercial waste collection and municipal solid waste disposal services in local markets in Canada and the United States.

Republic generated total revenues of approximately $10.2 billion in 2020.

Santek generated total revenues of approximately $140 million in 2019, the last year for which information is publicly available.