Why the Cleanaway share price surged 7% higher today

The Cleanaway Waste Management Ltd (ASX:CWY) share price has been a strong performer on the S&P/ASX 200 index today. Here's why…

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The Cleanaway Waste Management Ltd (ASX: CWY) share price has been amongst the best performers on the ASX today.

The waste management company's shares climbed over 7% this morning. They have since dropped back a touch, but are still up over 5% to $2.02 this afternoon.

Why is the Cleanaway share price charging higher?

Investors have been buying Cleanaway's shares after it revealed that it was the successful bidder for the SKM Recycling assets.

According to the release, the company will acquire the properties, plant and equipment, and certain other assets of SKM for $66 million. This follows the public sale process conducted by KordaMentha, who were appointed receivers and managers in August. Management expects the acquisition to complete by the end of October.

Why has Cleanaway acquired these assets?

The release explains that the acquisition provides Cleanaway with a network of five recycling sites. These include three material recovery facilities and a transfer station in Victoria and a material recovery facility in Tasmania.

In addition to this, the acquisition includes two properties in South Australia. However, management is looking into its options with these assets and could sell them.

Cleanaway's CEO and managing director, Vik Bansal, believes the deal provides the infrastructure required to capitalise on growth opportunities.

He said: "The Acquisition provides Cleanaway with a strong recycling platform in Victoria and Tasmania as part of our Footprint 2025 strategy and our mission of making a sustainable future possible."

"The recycling sector is undergoing significant structural changes with a move to increase recycling within Australia to support a transition towards a circular economy. The Acquisition provides us with the infrastructure to capitalise on the growth opportunities created by these changes," he added.

Should you invest?

I think that this is a good deal for Cleanaway and should give its growth an added boost in FY 2020.

Overall, I continue to believe it could be a good long term investment along with industry peer Bingo Industries Ltd (ASX: BIN). I feel both companies can grow strongly over the next decade and potentially provide strong returns for investors.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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