Heritage-Crystal Clean, owner of North America’s second-largest rerefinery, announced today an agreement to be bought by private equity firm J.F. Lehman & Co. for $1.2 billion.
The price represents a 25% premium on the average value of Crystal Clean’s stock shares over the past two months. Lehman officials suggested that the value of businesses that treat and recycle waste has risen during the sustainability movement.
“At a time when businesses across industries are more environmentally conscious and highly focused on running cleaner, we are excited to partner with Crystal Clean …,” Lehman Partner Glenn Shor said in a news release.
Headquartered in Hoffman Estates, Illinois, Crystal Clean is an environmental services provider that cleans mechanical parts, disposes of hazardous and non-hazardous waste, responds to spills and related emergencies and collects and recycles materials such as automotive antifreeze. It also collects used automotive engine oil and operates a rerefinery in Indianapolis with capacity to produce 3,200 barrels per day of mostly API Group II base stocks.
The only North American rerefinery producing more base stocks is Safety Kleen’s 5,600 b/d plant in East Chicago, Indiana.
Rerefiners have long pitched their base oils as reducing dependency on oil refining and as coming from processes that make efficient use of resources, but they claim that their products are valued more now that businesses of all sorts are looking for ways to reduce carbon footprints.
Crystal Clean’s financial performance has been trending upward recently thanks to improvements across its activities. The company’s net income rose 29% in the first quarter of this year, compared to the same period of 2022, and 28% for the full year 2022. Profit before selling, general and administrative expenses for the Oil Business unit, which includes oil collection and rerefining activities, jumped 32% in 2022 before falling 24% in this year’s first quarter.
By comparison, profits for the Environmental Services unit, which includes the company’s other activities, rose 25% in 2022 and 74% in the first quarter.
Lehman is located in New York and has investments in the aerospace, defense, maritime and environmental sectors. It currently manages $5.4 billion worth of assets.
The transaction is subject to regulatory review and approval by shareholders of Crystal Clean stock, which trades on the Nasdaq exchange. Officials said they expect it to close in the fourth quarter of this year. The agreement also allows Crystal Clean 35 days – until August 23 – to shop for a better offer.