Imperial Capital Cuts Price Target on Waste Connections (WCN) as New Treasury Regulations Compromise BIN Merger

Imperial Capital maintained an Outperform rating on Waste Connections Inc. (NYSE: WCN), and cut the price target to $72.00 (from $75.00), following the U.S. Treasury Department's new regulations regarding tax inversions. The inversion regulations compromise a bit of the tax accretion from the company's BIN merger. However, in a press release, WCN affirmed its commitment to the merger and expects a 2Q16 closing.

Analyst Scott Levine commented, "On 4/4/16, the U.S. Treasury Department issued new regulations regarding tax inversions (mergers involving the relocation of a U.S. company’s domicile to a foreign country, typically with the effect of reducing its tax burden). The new regulations are the third set of such measures from the IRS over the past few years, and include limitations on foreign companies’ use of historical acquisitions to effect corporate inversions, and the use of inter-company debt to shield U.S. income from tax (commonly referred to as “earning stripping”). On 4/5/16, WCN and BIN issued a joint press release in which they affirmed their commitment to the merger, and estimated that the new regulations would impact pro forma Year 1 free cash flow (FCF) of $625mn+ by “less than 3%,” or $18.75mn. Prior guidance had called for tax accretion of ~$50mn resulting for the relocation of WCN’s domicile to Canada."

For an analyst ratings summary and ratings history on Waste Connections Inc. click here. For more ratings news on Waste Connections Inc. click here.

Shares of Waste Connections Inc. closed at $62.94 yesterday.

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