Cleanaway share price on watch after acquisition update

The Cleanaway Waste Management Ltd (ASX: CWY) share price is on watch after an update on its acquisition of SKM Recycling Group this morning.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Cleanaway Waste Management Ltd (ASX: CWY) share price is on watch this morning after it completed its acquisition of SKM Recycling Group.

What's the story behind the acquisition?

Cleanaway announced on 9 October that it was the successful bidder for SKM and would acquire SKM's assets.

This followed a public sale process by receivership firm KordaMentha, which was appointed on 21 August.

Cleanaway acquired SKM assets for $66 million with proceeds going towards repaying the company's senior debt.

The deal represents the latest acquisition in an industry that is changing quickly.

How does the acquisition help Cleanaway?

Cleanaway's recycling network will expand by 5 sites with 4 in Victoria and 1 material recovery facility in Tasmania.

The SKM acquisition includes 2 properties in South Australia, which Cleanaway is expected to sell.

The new assets have a market value of $50 million with the majority of full-time SKM staff to be employed by Cleanaway.

CEO Vik Bansal said the SKM acquisition provides Cleanaway with "a strong recycling platform in Victoria and Tasmania."

How will the Cleanaway share price react?

Given this morning's announcement was just providing confirmation of the process, I wouldn't expect the Cleanaway share price to move too much.

Cleanaway shares have been under pressure in the last 6 months but remain up 12.20% for the year.

The company's shares were trading at $1.84 per share as at market open but could be an early mover after the announcement.

Should you buy Cleanaway shares?

Cleanaway isn't a bad option on the ASX at the moment, given it is in a defensive or non-cyclical industry.

The demand for waste management services remains constant even in a recession and this helps maintain earnings (and dividends).

The Cleanaway share price is trading at 30.8x earnings with a dividend yield of 1.92% per annum.

While this doesn't make Cleanaway a high-income stock, it could be a great diversification option in 2020.

Motley Fool contributor Kenneth Hall 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.

More on Share Market News

Oil industry worker climbing up metal construction and smiling.
Energy Shares

ASX 200 energy shares lead the market as US trade deals fuel optimism

ASX energy shares lifted 3.94% as more US trade deals led to improved market sentiment.

Read more »

A female ASX investor looks through a magnifying glass that enlarges her eye and holds her hand to her face with her mouth open as if looking at something of great interest or surprise.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Broker Notes

These ASX 200 shares could rise 50% to 60%

Brokers believe these shares could deliver big returns for investors.

Read more »

A girl is handed an oversized ice cream cone with lots of different flavours.
Best Shares

8 ASX All Ords shares that tripled in value in FY25

Just 8 out of the 500 companies making up the ASX All Ords achieved share price growth of 200% or…

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman with a scared look has hands on her face.
Broker Notes

Bapcor shares fell more than 30% yesterday. Should investors buy in the dip?

Is this a value opportunity?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Broker Notes

Broker raises price targets on 2 ASX 200 shares to buy

Ord Minnett has just upped its 12-month share price targets on 2 buy-rated ASX 200 stocks.

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »