Stericycle: Reportedly Considering Sale Amid Takeover Interest; We Maintain Our $60 Fair Value Estimate

Stericycle’s stock surged in late trading on May 24 after Bloomberg News reported that the medical waste specialist is considering a sale. Sources said other medical waste companies or infrastructure funds could be interested. We were surprised by this news, although we had thought that this could be the outcome for Stericycle someday, after it was further along in its turnaround story. We think Stericycle could be a good fit with traditional solid waste collection and disposal firms Waste Management or Republic Services, which may increasingly look to adjacent markets for growth. Indeed, Republic Services recently expanded into environmental solutions with its acquisition of US Ecology, which treats and disposes of hazardous and nonhazardous industrial waste. Our understanding is that WM struggled to profitably gain scale in the medical waste space years ago and exited most of its related businesses, and Stericycle handles medical waste collection and disposal activities for Republic Services as an alliance partner.