Waste Connections, Inc. History

Company Perspectives:

Our growth is being accomplished by aggressively acquiring selected companies in high growth markets and enhancing their operations through the introduction of modernized fleets, technology, management support, and the capital that comes from being part of a publicly traded company. We look to grow rapidly within a market through expanding the range of services we offer and by helping our local managers to continue the success they have built locally by expanding into adjacent regions. As we grow, whether by acquisition or by internal growth, we seek to constantly upgrade our level of customer service. At the same time we look to retain the local name and goodwill associated with the companies and the entrepreneurs who helped to build them.

Key Dates:

1997:

Ron Mittelstaedt founds company to acquire Browning-Ferris assets.

1998:

Waste Connections completes its initial public offering of stock.

1999:

Acquisition of International Environmental Industries Inc. makes Waste Connections one of the largest waste disposal companies in the country.

Company History:

Waste Connections, Inc. is the fourth-largest, publicly-held solid waste services company in the United States. The company provides solid waste collection, transfer, disposal, and recycling services in 15 states west of the Mississippi River, serving more than 700,000 commercial, industrial, and residential customers in suburban and rural communities. Waste Connections owns and operates 64 collection operations, 21 transfer stations, 14 landfills, and 16 recycling facilities. Additionally, the company manages, but does not own, another nine transfer stations and six landfills.

Founder's Background

Not long after its formation, Waste Connections earned the reputation as a fast-growing company destined for national prominence, a fitting description for a company founded by a young, fast-rising executive headed for national recognition himself. Ron J. Mittelstaedt, the architect of Waste Connections' formation, achieved success in the corporate world at a young age, enjoying the power and the responsibilities typically conferred upon someone ten years his senior. A graduate of the University of California at Santa Barbara, where he earned a bachelor of science degree in economics at the age of 20, Mittelstaedt joined the transportation industry after completing his studies. He spent roughly three years working for Airborne Express in New York City, before being selected to manage the company's operations in San Francisco. Mittelstaedt's promotion brought him into contact, for the first time, with the waste disposal industry.

While working in operations management in San Francisco, Mittelstaedt was approached by an executive recruiter. Browning-Ferris Industries, Inc., a massive waste disposal firm on a never-ending acquisition spree, was looking outside the waste disposal industry for someone to manage some of the companies it had purchased. Specifically, Browning-Ferris needed an executive skilled in managing transportation logistics, and the then 24-year-old Mittelstaedt stood out among the list of candidates. An offer was made to Mittelstaedt, offering him a post in Tucson, Arizona, but he declined, not wanting to relocate to that area. Browning-Ferris was not to be denied the services of the youthful Mittelstaedt, however. Three months after Mittelstaedt refused the company's offer, Browning-Ferris came back with another offer; a similar position, but this time in Sacramento. Mittelstaedt accepted the job offer, and entered an industry in which he would exert considerable influence.

Mittelstaedt was hired as a sales manager at Browning-Ferris, charged with overseeing the company's commercial and industrial selling activity in the Sacramento Valley. By the time he was 26 years old--two years after joining Browning-Ferris--Mittelstaedt earned a promotion, becoming general manager of the company's operations in the Sacramento area. He spent roughly another four years working for the industry giant, learning the Browning-Ferris approach to growth within the waste disposal industry. The lessons he learned during his tenure would be put to use roughly a decade later, forming the strategic basis for Waste Connections' prolific growth.

Browning-Ferris was the product of a Houston accountant's perspective on an industry set to undergo sweeping change. Tom Fatjo, Jr., who kept financial records for a number of garbage collectors in Houston, foresaw the effect looming federal legislation would have on a highly-fragmented industry populated by thousands of small, independent garbage collection companies. During the 1960s, the U.S. Congress mandated that garbage collection trucks meet higher standards of sanitation. Further, legislation stipulated that, owing to concerns related to air pollution, the incineration of garbage would give way to landfill burial. For the sundry independent garbage collectors, the new proclamations sounded the death knell of their existence. To comply with the new standards, large capital investments would be needed to establish the garbage business as a modern, sanitary, and technologically competent industry. Most of the small companies were in no position to raise the money needed to survive in the new industry. Accordingly, Fatjo assembled an investment team to take advantage of the opportunity. His company, Browning-Ferris, began acquiring local garbage collection companies at a frenetic pace, devouring hundreds of local operators a year to create a large, integrated, multi-jurisdictional waste disposal company.

Browning-Ferris' aggressive acquisitive activity had not slackened by the time Mittelstaedt joined the firm. When he left Browning-Ferris in 1993, he became part of the great shuffle of waste disposal companies that created industry stalwarts. He joined Sanifill, an upstart company that later merged with other waste disposal operators, eventually joining another industry behemoth, Waste Management, Inc. The change in employers forced Mittelstaedt to move to Chicago, a move he quickly regretted. He resigned and moved back to El Dorado Hills, northeast of Sacramento. Several small public companies in the waste disposal industry approached Mittelstaedt, offering him leadership positions as chief executive officer of their firms, but he declined. In his early 30s at the time, Mittelstaedt had decided to leave the waste disposal industry and to pursue interests in other business areas.

The Late 1990s Birth of Waste Connections

Mittelstaedt's departure from the waste disposal industry was stopped by an enticing bit of information. The source of the news was Browning-Ferris. The ever-expanding company had decided to sell its operations in Idaho and Washington to raise capital. Mittelstaedt heard about the proposed divestiture in July 1997 and quickly decided that he wanted to buy the properties. He submitted a bid in August and assembled a management team to lead the company that would control the Browning-Ferris assets. Mittelstaedt solicited the help of former colleagues at Browning Ferris, as well as several executives who worked for USA Waste Services. As Waste Connections' leadership was being assembled, Mittelstaedt turned to the task of raising the money needed to make his company a viable corporate entity. He raised $8.5 million in private capital from his business contacts and invested his own money into the concern, ranking as the largest single investor. Next, Mittelstaedt secured a $10 million line of credit from an unnamed bank in Seattle, which was used to pay for the Browning-Ferris assets. Mittelstaedt was in business, selecting Roseville, California, as the home for his new company.

Waste Connections, incorporated on September 9, 1997, commenced operations on October 1, 1997, the day after the Browning-Ferris deal closed. Combined, the operations acquired by Waste Connections, which had been acquired by Browning-Ferris at various times in 1995 and 1996, generated $13.4 million in revenue in 1996. Mittelstaedt and his executive team would add to this total, quickly and considerably, assiduously adhering to an acquisition strategy that constituted the basis of Waste Connections' success.

From its inception, Waste Connections strove to become the dominant company in the secondary, non-urban markets located west of the Mississippi. The company shunned large metropolitan markets, opting instead to build an integrated, clustered presence in the suburban and rural west. Further, waste disposal companies were only considered as acquisition candidates if they controlled a leading market share in their communities, generally needing to rank either first or second in their markets. Waste Connections officials also made sure the acquisition targets had access either to their own landfill or to a municipal dump, thereby avoiding dependence on a local competitor. Lastly, Waste Connections preferred to acquire a company with an exclusive right to operate in its market, either through a franchise agreement, a long-term municipal contract, or a governmental certificate.

Few industry observers chose to argue against Waste Connections' acquisition strategy. The company focused exclusively on the western United States because, compared to the East, the competition was less intense, there were stronger projections for economic growth, and a greater number of number of independent companies suitable for acquisition. Mittelstaedt's decision to operate in rural and suburban markets appeared prudent as well, sheltering the company from the more intense competitive pressures in metropolitan markets and providing a greater opportunity to secure exclusive operating rights within a particular market. In theory, Waste Connections' operating strategy was sound; the company's success, however, would depend on the execution of its strategy. In the years ahead, the diligent selection of acquisition targets and the efficient integration of the acquired companies into the company's fold would determine the success of Mittelstaedt's bid to become an industry giant.

Growth through Acquisition in the Late 1990s

Roughly a half-year after its formation, Mittelstaedt could point to an unruffled start to Waste Connections' rise to dominance. The company had successfully integrated a number of waste disposal firms in Washington, California, Idaho, Wyoming, and South Dakota. Through nine collections operations,

The process of selecting acquisition targets, acquiring the companies, and integrating them into the company's existing operations progressed following the IPO. Waste Connections adopted a pace of expansion that averaged nearly 40 acquisitions a year during its first four years of business. In October 1998, the company signed a definitive merger agreement with four waste collection companies in Washington. The companies--Murrey's Disposal Company, Inc.; American Disposal Company, Inc.; D.M. Disposal Co.; and Tacoma Recycling Company, Inc.--were collectively known as The Murrey Companies, generating roughly $33 million in annual revenue and ranking as one of the largest independent companies in the Pacific Northwest. The transaction was completed in January 1999, making Waste Connections one of the largest waste collectors in the suburban Seattle/Tacoma area. The acquisition increased Waste Connections' revenue base by more than 40 percent.

The addition of The Murrey Companies marked the beginning of a prodigious acquisition spree. In 1999, when corporate headquarters were moved to Folsom, California, Waste Connections acquired 51 businesses, including the largest since its inception two years earlier. In August 1999, the company purchased International Environmental Industries Inc. (IEII), an operator of four landfills and three collection operations in markets surrounding El Paso and southern New Mexico. The acquisition made Waste Connections one of the largest hauling and disposal firms in the country, the significance of which was not lost on Mittelstaedt. In an August 12, 1999 interview with The Sacramento Bee, he remarked, "It's an enormous milestone. It represents the largest transaction we've ever done in terms of revenues, cash flow, and number of employees." The addition of IEII positioned Waste Connections for continued expansion in Texas, Oklahoma, and New Mexico, with El Paso serving as a regional headquarters.

Although Waste Connections' pace of expansion slowed in 2000, the vitality of the company intensified decidedly. During the year, 25 businesses were acquired, increasing revenues from $184 million to $304 million. Waste Connections' net income, a measure of how successfully the company integrated its new assets, soared, jumping from $9.2 million in 1999 to $28.2 million. Equally as important, the company's esteem among investors was at an all-time high. In 2000, Waste Connections' stock ranked as the top performer in the environmental sector, appreciating 129 percent. After hovering at $9 per share at the end of 1999, the company's stock was trading at $34 per share by August 2001.

At the time of Waste Connections' robust stock valuation, Mittelstaedt presided over a vibrant solid waste empire. Between the company's IPO and August 2001, roughly 135 private businesses were acquired, giving Waste Connections a customer base of nearly 800,000. Four years after its creation, the company ranked as the fourth largest, publicly-owned solid waste company in the United States, larger than the four companies ranking fifth through eighth combined. In the coming years, Waste Connections' strident expansion was expected to continue forward. According to the company's calculations, there were approximately 2,000 private solid waste companies located west of the Mississippi. Mittelstaedt and his team estimated there were roughly 450 companies suitable for inclusion within Waste Connections' operations. The years ahead promised to see the acquisition and integration of these companies into one of the industry's powerhouses.

Principal Subsidiaries: WCI Acquisition Corporation.

Principal Competitors: Waste Management, Inc.; Republic Services, Inc.; Allied Waste Industries, Inc.

Further Reading:

• Lamb, Celia, "Waste Firm Buys Nine More," Sacramento Business Journal, October 13, 2000.
• Schmidt, Bob, "Ron Mittelstaedt," Sacramento Business Journal, March 3, 2000, p. 29.
• Walter, Bob, "Sacramento, Calif.-Area Firm Creates Solid Waste Empire," Sacramento Bee, August 17, 2001, p. 14.
• "Waste Connections, Inc. and The Murrey Companies Announce Merger Agreement," PR Newswire, October 22, 1998, p. 26.
• "Waste Connections, Inc. Announces Its Initial Public Offering," PR Newswire, May 22, 1998, p. 3.
• "Waste Connections Trades Idaho Holdings," Sacramento Business Journal, April 21, 2000, p. 3.

  Source: International Directory of Company Histories, Vol. 46. St. James Press, 2002.

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