* Clean Harbors says deal to immediately add to earnings
* Says acquisition to boost oil re-refining services
By Swetha Gopinath
Oct 29 Waste management company Clean Harbors
Inc will buy Safety-Kleen Inc for $1.25 billion to
expand into the business of recycling used motor oil, two years
after the privately held firm rejected its initial bid.
The acquisition of Safety-Kleen, which also provides
environmental services to motor races including NASCAR, will
help Clean Harbors expand its solvent-recycling capabilities and
broaden its waste treatment services.
Clean Harbors has long been interested in Safety-Kleen, a
competitor and customer whose chemical services business it
bought a decade ago.
Norwell, Massachusetts-based Clean Harbors proposed to buy
Safety-Kleen for $13 per share in 2010 but the company sought
more than $20 per share.
The latest offer equates to $24.50 per share based on
Safety-Kleen's outstanding shares as of Aug. 31.
"Valuation of the deal looks attractive at 6.5 times
earnings before interest, taxes, depreciation, and amortization
especially given the strength of the business," said a Clean
Harbors shareholder, who did not wish to be named.
Different customer focus should allow good scope for
cross-selling, the shareholder said.
Safety-Kleen focuses on small-quantity generators compared
with Clean Harbors, which typically caters to larger customers.
Safety-Kleen, which in August filed to raise up to $400
million from an initial public offering, counts Highland Capital
Management, Contrarian Capital Management, JPMorgan Chase and
GSC Acquisitions Holdings, as its top four investors.
"Safety-Kleen services over 200,000 customer locations, and
we envision substantial cross-selling opportunities with its
extensive customer base," Clean Harbors Chief Executive Alan
Safety-Kleen, which had revenue of $1.3 billion last year,
owns an oil re-refinery in Indiana with a capacity to process
120 million gallons of used oil annually, and a re-refinery near
Kitchener, Ontario, with a capacity to process 40 million
Plans are underway to add another 10 million gallons of
capacity to the Ontario plant in the fourth quarter, Clean
Harbors CEO McKim said on a conference call with analysts.
Safety-Kleen, which operates a fleet of more than 2,300
vehicles and 1,000 rail cars, collects and processes about 200
million gallons of used oil annually.
There are 900 million gallons of used oil in the United
States that can be captured, while government and regulatory
pressure to increase re-refining has boosted the business.
Clean Harbors expects the all-cash deal, its biggest to
date, to immediately add to earnings, excluding one-time fees
The company said it has received financing commitment from
Goldman Sachs Bank USA but is also considering options that may
include a combination of existing cash, debt and equity.
Credit Suisse served as the lead financial adviser to
Clean Harbors's shares, which have fallen 14 percent in the
last 12 months, closed at $49.44 on the New York Stock Exchange