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.
