In terms of customer reach and national footprint, the merged entity will be the third largest operator in New Zealand, behind the two foreign-owned entities, Waste Management and EnviroWaste, which are owned by Chinese interests.
The merger combines Smart Environmental's expertise in council recycling solutions and collection services with Earthcare's strengths in organic waste collection and processing, the companies said.
The merged group will be known as Smart Environmental, although Earthcare and market brands will be retained.
Smart Environmental chief executive Todd McLeay said a key feature of the enlarged organisation would be its focus on recycling and diversion from landfill.
The merged group will own five material recovery facilities but no landfills of its own.
"New Zealand is moving away from a 'throw away' economy, which has landfill as the default answer, to a circular approach that focuses on the reduction of waste, the recovery of resources and ongoing recycling," he said.
"This merger extends our collective reach and capability to rapidly advance that agenda," McLeay said in a statement.
He said Smart was well positioned given significant environmental regulatory change under way that is set to transform the waste industry – especially a six-fold hike in the landfill levy between 2021 and 2024.
The intent of the higher levy was to reduce the amount of waste being dumped in landfills, with levy funds being directed towards recycling and waste minimisation programmes.
The merger created a significant national footprint and the necessary scale to enable greater efficiency through investment in automation, reduced transport costs and lower emissions, McLeay said.
Earthcare founder Mike Jones said Earthcare had built a strong position in organic material collection and processing.
"The Government is currently consulting on emission reduction and waste strategy and both feature the removal of organics from disposal to landfill as a priority."
McLeay will be CEO of the enlarged group, while Jones will stay on as part of the new leadership team and take a significant shareholding in the combined entity.
Smart's majority shareholders are funds associated with New Zealand investment groups Maui Capital and Milford Asset Management.
Other shareholders include Grahame Christian, the founder of Smart Environmental, and former Spark managing director Simon Moutter, who chairs the Smart Environmental board.
Earthcare was founded in 1989 and has grown to become one of the largest green waste companies New Zealand.
Waste Management has been the subject of media speculation suggesting the state-owned Beijing Capital Group Co is exploring a sale of the once-listed Waste Management for US$1billion ($1.4b).
The Kiwi company was delisted in 2006 after its amalgamation with Australia's Transpacific Industries.
Beijing Capital acquired Waste Management for $950 million from ASX-listed Transpacific in 2014.
Around the same time, Hong Kong-based Cheung Kong Infrastructure paid $501 million for EnviroWaste.
