Boulevard Acquisition Corp. II (NASDAQ: BLVD), a blank check company sponsored by an affiliate of Avenue Capital Group, and Estre Ambiental S.A. the largest waste management company in Brazil and Latin America, jointly announced today that they have entered into a definitive agreement pursuant to which Boulevard will combine with Estre. As a result of the transaction, Estre will become a publicly listed company with an anticipated initial enterprise value of approximately US$1.1 billion, implying a 7.7x multiple of its projected 2018 Adjusted EBITDA.
Estre provides a full range of waste-related and environmental services to a public of more than 31 million people daily in seven Brazilian states where approximately 50% of Brazil’s population is concentrated. The company, which is expected to generate revenues of approximately US$466 million and adjusted EBITDA of approximately US$132 million in 2017 (considering a USD/BRL exchange rate of US$1.00 to R$3.19), focuses on collection, treatment and disposal of non-hazardous and hazardous waste to municipal, industrial and commercial customers. Showing consistently high-single-digit revenue growth in an expanding market, Estre is favorably positioned to lead in a fragmented industry with increasing regulatory support for environmentally-sound waste disposal.
Today, Estre operates as an environmentally progressive, transparent and compliance-focused company. Estre’s landfill operations, which are currently focused around 13 strategically located landfills, dispose of approximately 6 million tons of waste annually. The company also expects to add five additional landfills to its operations over the next several years. Estre’s waste management infrastructure also includes two landfill gas-to-energy facilities with an installed capacity of approximately 14 MW, with the potential to generate more than 80 MW, as well as three hazardous and medical waste facilities.
Estre’s management team, led by chief executive officer Sérgio Pedreiro, will continue to lead the company following the completion of the transaction. It is anticipated that the board of directors of the company will be comprised of nine members, including five independent directors with strong environmental services and compliance backgrounds.
Stephen Trevor, Chief Executive Officer of Boulevard, said, “We are excited to join with Estre’s strong and disciplined leadership team to grow Brazil’s waste management industry leader both organically and by pursuing tuck-in opportunities. The Estre team is known as high-performing operators, and they also have distinguished themselves in Latin America for their environmentally progressive practices and the implementation of a strong compliance program since the current leadership took over.”
Sérgio Pedreiro, Chief Executive Officer of Estre, said, “Estre will continue to work hard to distinguish itself as one of the leading waste management enterprises in Latin America. With Brazilian waste tonnage growing consistently at 4% per year over the last few years and a favorable regulatory framework, this transaction provides Estre the resources necessary to continue to capture growth and to invest in acquisition opportunities. We look forward to partnering with Boulevard to accelerate the execution of our growth strategy.”
Marc Lasry, Chairman of Boulevard, said, “We are making this investment at an attractive valuation at what we believe is an inflection point in Brazil’s macroeconomic backdrop, and as the country’s solid waste industry continues to consolidate and institutionalize.”
Key Transaction Terms
Under the terms of the transaction, a new Cayman holding company will be formed and, prior to the consummation of the business combination, all or substantially all of the shareholders of Estre will exchange their shares of Estre for shares of Holdco at a fixed value of US$10.00 per share and as a result Estre will become a subsidiary of Holdco. At the closing, Boulevard will also become a subsidiary of Holdco, which will be the publicly traded entity with its shares listed on NASDAQ, and the outstanding Boulevard shares will be converted in the business combination into shares of Holdco at a fixed exchange rate of one-to-one. All outstanding warrants to purchase Boulevard shares will, by their terms, become warrants to purchase shares of Holdco with an exercise price of US$11.50 per warrant.
It is expected that the combined company will have an initial enterprise value of approximately US$1.1 billion, implying a 7.7x multiple of projected 2018 Adjusted EBITDA.
Estre shareholders are not receiving any cash consideration in the transaction and will receive shares of the new publicly traded holding company. After giving effect to the transaction and assuming no redemptions by the existing Boulevard stockholders, existing Estre shareholders will hold approximately 43% of the shares of the public company, while existing Boulevard stockholders will hold the remaining shares. It is anticipated that the cash held in trust by Boulevard (currently US$370 million) will be used to retire US$200 million of existing debt of Estre, at a discount to its outstanding principal amount, and to fund the company’s growth plans and its working capital requirements, as well as transaction expenses.
About Estre Ambiental S.A.
Estre is the largest waste management company in Brazil and Latin America. The company provides a full range of waste-related and environmental services to a public of more than 31 million people daily in seven Brazilian states where approximately 50% of Brazil’s population is concentrated. Estre’s landfill operations, which are currently focused around 13 strategically located landfills, dispose of approximately 6 million tons of waste annually. The company also expects to add five additional landfills to its operations over the next several years. Estre’s waste management infrastructure also includes two landfill gas-to-energy facilities with an installed capacity of approximately 14 MW, with the potential to generate more than 80 MW, as well as three hazardous and medical waste facilities. Additional information on Estre is available at http://www.estre.com.br/en/.
About Boulevard Acquisition Corp. II
Boulevard is a public investment vehicle formed by Avenue Capital Group for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. Boulevard completed its initial public offering in September 2015, raising US$370 million in cash proceeds.
Boulevard’s officers and certain of its directors are affiliated with Avenue Capital Group. Avenue is an established global alternative investment firm founded in 1995. Avenue’s primary focus is investing in credit and other special situation investments in the United States, Europe and Asia. Avenue has approximately US$10 billion in assets under management as of July 31, 2017. Additional information about Boulevard is available at www.boulevardacq.com.
