One of the big pieces of news to kick off the ASX trading week this Monday has been the announcement that waste management stock Cleanaway Waste Management Ltd (ASX: CWY) has entered into a Scheme Implementation Deed. This will see Cleanaway shares acquired in full by EQT Infrastructure.
As my Fool colleague Laura covered this morning, the deal proposes that EQT will acquire Cleanaway shares for a price of $3.095 in cash per share, representing a 34.5% premium to the three-month value-weighted average price of the company.
Although this news is still fresh, it seems that Cleanaway and the markets are treating it as a done deal. Cleanaway’s board has given the proposal the green light, stating “the Board is unanimous in its view that the Scheme delivers strong and certain cash value to shareholders, at a significant premium to Cleanaway’s undisturbed share price”. The board is unequivocally recommending that shareholders vote for the scheme.
The market has also seized the news with gusto, with Cleanaway shares currently up a stinking 20.05% at $2.96 each. Of course, that is not quite at the $3.095 that is on the table. But it is still a long way from the $2.47 Cleanaway shares closed at last Friday.
Those market watchers looking at this 20% jump in the Cleanaway share price today might understandably assume it is a windfall for shareholders. It certainly is for investors who picked up Cleanaway shares at recent prices. Anytime in the past 12 months, really, given the company hit a new 52-week high of $2.99 today. However, it’s not really enough to save longer-term investors who have been holding on to this stock.
A 20% jump can’t save Cleanaway shares
One might assume that a stock like Cleanaway has been a sure bet. After all, this is the largest waste management service provider in the country. Waste management is an essential service that is almost entirely immune from the economic cycle. As a functioning society, it goes without saying that we need to collect, process, and remove our rubbish, garbage, and waste regularly. That’s regardless of whether inflation is high or low, or whether the economy is booming or busting.
That should, at least in theory, give Cleanaway a permanent tailwind. That, unfortunately, has not been the lived experience of Cleanaway’s investors. This is an ASX 200 stock that just never seems to go anywhere. To illustrate, today’s 20% jump merely raises Cleanaway shares back up to where they were all the way back in April of 2022. Any investors who bought back then have simply traded water eer since. Even the company’s dividends (today yielding about 2.3%) wouldn’t have made a huge dent in that miserly performance.
Looking through this lens may explain why EQT Infrastructure is happy to pay $3.095 per Cleanaway share. This company’s long-term shareholders may not be delighted with the price that is on offer from the takeover. However, they may just relish the opportunity to get out of this stock anyway.
The post Up 20%: Has the EQT deal saved Cleanaway shares? appeared first on The Motley Fool Australia.
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More reading
- Cleanaway Waste Management enters $9.3bn Scheme with EQT Infrastructure
- 5 things to watch on the ASX 200 on Thursday
- Here are the top 10 ASX 200 shares today
- Buy, hold, sell: New Hope, Cleanaway Waste Management, NextDC shares
Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.