Bingo Industries Ltd (ASX:BIN) share price down in the dumps after ACCC blow

Source: Bingo Presentation

One of the worst performers on the local share market on Thursday has been the Bingo Industries Ltd (ASX: BIN) share price.

In morning trade the waste management company’s shares have dropped a sizeable 8% to $2.09.

Why are Bingo’s shares sinking lower?

Investors have been hitting the sell button in a panic today after the Australian Competition and Consumer Commission (ACCC) provided feedback on the company’s planned $577.5 million acquisition of Dial-a-Dump Industries.

According to the ACCC release, the competition watchdog has identified concerns with the acquisition.

ACCC Chair Rod Sims said: “Post-acquisition, Bingo would be the largest B&D waste collector and processor and own a substantial amount of dry landfill capacity in Sydney. We are concerned about the effect of the proposed acquisition in relation to processing, landfill and collections.”

Before adding: “Our preliminary view is that the acquisition would remove Bingo’s most substantial competitor for B&D waste processing, particularly in the Eastern Suburbs and inner Sydney. Although alternative facilities exist, our current view is that many are not viable alternatives as they either will not accept third party mixed B&D waste, charge significantly more for heavy loads, or are too far away to constrain Bingo from increasing prices.”

Mr Sims also has concerns over the impact the acquisition could have on gate fees.

He said: “The acquisition would remove future competition between Bingo’s and Dial-a-Dump’s dry landfills, which may lead to higher gate fees than would be likely without the acquisition. Competition between Sydney landfills is likely to become more important after the introduction of the Queensland landfill levy, which will make transporting waste to Queensland more expensive,”

What now?

Bingo’s managing director and chief executive officer doesn’t agree with the ACCC’s view.

In a response released this morning, CEO Daniel Tartak stated that: “We strongly disagree with the preliminary competition concerns raised in the ACCC’s SOI. We remain firmly of the view that the acquisition would not have the effect of substantially lessening competition in the Greater Sydney market. We provided the ACCC with an extensive data set, supported by a number of industry-leading experts, demonstrating this.”

The company will work with the ACCC in the lead-up to their final decision on February 21 2019.

Should you buy the dip?

If the ACCC were to block this acquisition it would be a major blow to the company. Because of this, I can’t say I’m surprised to see its shares tumble lower today.

While I think Bingo Industries is a quality company and a great long-term investment option, it might be best to wait for the decision in February before picking up shares.

Until then, fellow waste company Cleanaway Waste Management Ltd (ASX: CWY) could be a good alternative.

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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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