Activist Jana takes stake in Casella Waste, urges changes (updated)

Casella Waste Systems

Tue 21:23

Updates with stock movement
Casella's underperformance could make company a takeover target
Waste management sector has become a popular investment sector
Activist pressing company to commit to achieving higher profit margins
By Svea Herbst-Bayliss
NEW YORK, Oct 20 (Reuters) - Activist investment firm Jana Partners has built a new position in Casella Waste Systems CWST.O and wants the regional waste services company to improve its profit margins and returns on invested capital, the firm's managing partner and portfolio manager said on Tuesday.
The Rutland, Vermont-headquartered company, which has a market value of roughly $5.6 billion, has had its shares fall around 11% this year and has traded roughly flat over the past five years while competitors have performed better.
"Improving margins and operational execution can drive returns on capital, reignite its attractive growth flywheel and unlock Casella’s discounted valuation," Jana managing partner and portfolio manager Scott Ostfeld said at the 13D Monitor Active-Passive Investor Summit in New York.
Shares shot up after the news, ending the day at $93.07, up nearly 8%.
Casella's depressed valuation and strong position in the northeastern United States could make it an attractive target for buyers, Ostfeld said.
Casella is one of the last remaining regional solid waste companies in the public market. Buying up waste businesses has been a popular investment theme for private equity and infrastructure funds including Blackstone, EQT, Ares and TPG, and for larger industry buyers including Waste Management WM.N and GFL Environmental.
The sector is also inoculated from artificial intelligence risk, Ostfeld said, adding "they have zero AI risk."
Casella did not immediately respond to a request for comment.
The company, which was founded five decades ago with a single garbage truck, has struggled to improve its margins and integrate its largest-ever acquisition. In 2023, it bought mid-Atlantic waste assets from GFL Environmental GFL.TO for $525 million.
Jana, one of the busiest activist investors in the industry, wants Casella to better align its compensation with shareholder value and to publicly commit to achieving 27% earnings before interest, taxes, depreciation and amortization (EBITDA) margins by 2029, Ostfeld said. The company reported a margin of 22.7% for its quarter ended June 30, 2026.
To improve performance and better keep pace with its public rivals, Ostfeld said Casella should hire a performance improvement consulting firm, something Jana also pushed for at French fry maker Lamb Weston LW.N. Lamb Weston has committed publicly to cutting hundreds of millions of dollars in costs.    
Jana is one of the industry's most prolific activist investors and recently called on payments company Fiserv to work with software provider Palantir to speed up its own technology transformation program.

(Reporting by Svea Herbst-Bayliss; Editing by Sanjeev Miglani)
((svea.herbst@thomsonreuters.com; +617 233 2138; Reuters Messaging: svea.herbst.thomsonreuters.com@reuters.net/))