Vertex Energy Inc., of Houston, announced last week that it has agreed to buy Omega Holding Co.s rerefining assets, which include a used oil collection network, two facilities in Louisiana, the Bango Oil rerefinery in Nevada, and Cam2s lube oil blending plant in California, for nearly $50 million in cash, stock and assumed liabilities.
Vertex will first acquire Omegas rerefining facilities and collection networks in Marrero, La., and Myrtle Grove, La., along with Cam2s Golden State Lubricant Works blending facility in Bakersfield, Calif. The deal is expected to close in mid-April. Omega will then sell the Bango Oil rerefinery in Fallon, Nev., in the third quarter of 2014, after it is fully restored.
Vertex will pay for the assets with $30.75 million in cash, 2 million shares of its common stock thats currently valued at $7.5 million, and assumption of around $9.7 million in capital leases and other liabilities. Vertex will also provide Omega with a $1.6 million short term line of credit loan to fund its operations between the first acquisition closing in April and the second closing in the third quarter.
This acquisition will catapult Vertex to the second largest used motor oil rerefining company in North America, just behind Safety-Kleen, the companys CEO, Benjamin Cowart, said in a March 20 conference call. Together, Vertex and Omega represent 110 million gallons of used motor oil refining capacity.
Cowart said the Marrero rerefinery is capable of processing 60 million gallons and producing 40 million gallons of finished vacuum gas oil per year. Formerly an ethanol and biofuels plant, the plant was previously Chevrons before Omega purchased it several years ago. Its near Phillips 66s Alliance refinery and a Chevron Oronite additives plant, Cowart noted. This part of the deal gives us the opportunity to explore all hydrocarbon opportunities available.
The transaction will make Vertex a vertically-integrated specialty products company, he continued. With this acquisition, well have access to every vertical of the supply chain, from our used motor oil aggregation network – ranging from two- and three-truck local collectors to partnerships with FCC Environmental and Safety-Kleen – all the way up the value chain to our proprietary thermal chemical extraction process which contributes to fuel oil, base oil and finished lubricants.
Cowart and Omegas CEO, Dave Peel, explained that the Bango Oil refinery in Nevada will continue to operate as a full-cycle rerefinery which takes used motor oil and VGO from Omegas Louisiana plants, and uses hydrotreaters to produce base oil. The rerefinery has capacity to produce 1,400 barrels of API Group II base oil per day. Referencing a fire last December, Peel noted that the plant has had some setbacks, but that it is currently running just short of full capacity. Weve taken it from 8 million gallons of input per year to 22 million gallons of input per year, Peel noted. We use all of that feedstock [from the Bango and Marrero facilities] and then some, to produced finished lubricants at the Bakersfield blending plant, in which we recently invested three-quarters of a million dollars.
The Bango facility and the Bakersfield blending plant will provide Vertex with a foray into business on the West Coast, Cowart emphasized. The base oil market has had its trouble recently, but our Bango refinery is still very relevant and capable of producing value to the industry, especially to the California market, he said. With the acquisition, we are able to work with two new regions, which were our target markets – the Eastern Gulf region and the West Coast market. We now represent the majority of rerefinery capacity in the Gulf region.
Omega sold Cam2 earlier this month to its president, Jack Baker, and a group of investors.