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Firm Hauls In $250 Million : Anaheim's Taormina Accepts Stock Takeover Offer From Republic

February 06, 1997|JAMES S. GRANELLI | TIMES STAFF WRITER

ANAHEIM — Republic Industries Inc., a fast-growing conglomerate run by multi-billionaire H. Wayne Huizenga, said Wednesday it is acquiring one of California's largest waste management companies as part of an ambitious plan to expand its waste business throughout the West.

Taormina Industries Inc. has agreed to merge into Republic for about $250 million in stock. Brothers William and Vincent Taormina will receive 6.5 million shares and will operate the Anaheim company as a separate unit under its own name.

Taormina, with 1 million curbside customers in seven cities and processing operations for three dozen municipalities in Southern California, will become the West Coast headquarters for Republic's solid-waste disposal operations.

The transaction is the third announced in the last three days by Republic, which purchased two auto dealers for its nationwide superstore of new and used cars. It also has an electronic security business.

And the ambitious Huizenga is hardly through.

Taormina will be the "cornerstone" of Republic's push to acquire waste management operations throughout California and "in all the surrounding states," said Michael Karsner, chief financial officer of the Fort Lauderdale company. "Taormina has the management team and company culture and infrastructure to grow our business," he said.

Currently, Republic "doesn't have much" in solid-waste operations west of Texas, Karsner said.

William Taormina said the merger has been in the works for about three months. He and his brother will become corporate officers and be part of a four-member executive board overseeing Republic's entire waste management business. The brothers will concentrate on operations in the West.

"What attracted us to the deal was that we would not be losing control of our company and the way we do business," Taormina said Wednesday. "My brother and I want to set the direction and see our vision for Taormina Industries manifested," he said.

The merger, he said, is an "excellent way" for Taormina Industries to expand.

The acquisition is part of a continuing consolidation nationwide in the trash-hauling and recycling business. Smaller operations are struggling with slimmer profit margins, tougher regulations and greater costs.

"If I hadn't started out nearly 40 years ago, there's no way I could go into business today," said Tom Trulis, owner of Solag Disposal Inc., a small, family-run hauler in San Juan Capistrano that has contracts with six cities. "Sooner or later, we'll become a vanishing breed."

As more companies are gobbled up by the giants, he said, there will be less competition, prices will rise and cities and counties will have fewer choices.

The Taormina purchase marks Huizenga's major move into California, which is "a great waste market," said Stephen D. Weinress of investment banker L.H. Friend, Weinress, Frankson & Presson Inc. in Irvine. With all the mergers and acquisitions, he said, "who knows who's going to end up with the great desert landfills" that could hold the key to big profits.

The $100-million Taormina operation would boost Republic's annual solid-waste revenue to $800 million. The deal is expected to close by the end of the month, and more acquisitions are likely this year, Karsner said.

Huizenga, who built Waste Management (now WMX Technologies Inc.) and Blockbuster Entertainment into Fortune 500 companies and sold them, typically has used Republic stock to make his acquisitions, and that worries some industry analysts.

"If people have the confidence to take paper with Huizenga, more power to him," Weinress said. "He's basically got his own currency."

On Tuesday, Republic agreed to acquire Courtesy Auto Group in Orlando, Fla., for $30 million in stock, its eighth acquisition of a dealer group since late December. On Monday, it agreed to buy Wallace Automotive Group in southeast Florida for $55 million in stock.

Republic acquired Alamo Rent-A-Car in November and agreed last month to buy National Car Rental System. The price for both was about $3 billion in stock and assumed debt.

By the time all the pending deals close, the Taormina brothers will end up with 1.7% of Republic's 375 million shares outstanding, a stake that will be reduced as more stock is issued to buy other companies.

Despite the dizzying number of deals, Weinress said, Huizenga is known for buying solid companies with good market share and earnings. And the waste industry is "a very good business if you control costs," Weinress said.

The Taormina brothers built the company that their parents founded in 1949 into a major regional waste manager by going well beyond the simple trash hauling business. The company provides residents in seven cities--Anaheim, Brea, Garden Grove, Placentia, Villa Park, Yorba Linda and Colton--with three colored barrels to separate recyclables, yard waste and garbage.

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