Blue Sage Capital sees plenty of room in the Midwest for a new regional municipal solid waste hauler, and it's putting that plan into action with Blue Castle Waste Solutions.
The Texas-based private equity firm announced the new platform on Sept. 10. Blue Castle is expected to serve Minnesota and Iowa with a growing network of residential and commercial hauling assets. The company has so far closed three acquisitions: Carter-Miller Trash Service, based in Moravia, Iowa; Lee's Sanitation, based in Thief River Falls, Minnesota; and Bridge City and Commercial Sanitation, based in Ottumwa, Iowa.
The company plans to hit the ground running with improvements, said Peter Huff, founder and managing partner at Blue Sage. That includes a new fleet of automated side-loading vehicles and software from Routeware.
"We have a little bit more scale and a little bit more capital to reinvest back into serving the communities there," Huff said.
Blue Sage has experience developing waste companies. Its most recent investment in the MSW space was Frontier Waste Solutions, a Texas hauler that just sold to GFL Environmental in a deal valued at $900 million. Prior deals include the sale of R360 Environmental Solutions to Waste Connections in 2012.
Blue Sage was among the first backers of Frontier, teaming up with founder John Gustafson to build out the hauling platform. The private equity firm exited Frontier through a deal with Summer Street Capital Partners and Concentric Equity Partners in 2022 that netted Blue Sage more than six times its initial investment, per Huff.
Blue Sage has maintained ties with Gustafson, who will serve on Blue Castle’s board, according to Huff.
“I was happy when they got their next partner and wanted them to keep growing,” Huff said. “We like to sell with some gas left in the tank.”
Huff said Frontier achieved a revenue growth rate over 100% in its initial years. He also said the Texas market had room for expansion and collaboration — under Blue Sage’s direction, about three quarters of Frontier’s early growth came through winning hauling contracts, while a quarter came through acquisitions.
When Blue Sage ran Frontier in Texas, Huff said the company would occasionally engage in deals with some of the largest haulers to obtain favorable disposal fees, including swapping certain routes or markets in exchange for lower contracted landfill disposal rates.
Huff said Blue Sage plans to run a similar playbook in Minnesota and Iowa with Blue Castle, even if the market is not growing as quickly as Texas.
“[It’s] a much smaller and less dense geography, but a geography that has less competition and more opportunity to do things that we just didn’t have the time or capital to do at Frontier,” Huff said.
Huff declined to disclose the current size of Blue Castle’s fleet. The company owns one transfer station and operates two more under contract. Blue Castle does not own a MRF, though Huff said it's possible the company could acquire one if a client municipality was interested. But he’s focused on solid waste, particularly in light of volatile commodity prices affecting recyclers.
"We want to be rewarded for doing a good job of what we can control," Huff said. "We don't want to be at risk for things we don't control, like the price of aluminum."
Huff expects Blue Castle will close an additional two acquisitions in its first year of operations. He said the company is focused on acquiring haulers and growing its fleet, but it will also explore developing its own disposal infrastructure. That could include building its own landfill, acquiring one or taking over operations from a municipality looking to cut costs.
"We're not trying to take on the Waste Managements and Waste Connections of the world, and we don't have aspirations to be that big," Huff said. "We just want to be a very good, solid regional leader."
