Vertex said it has begun exercising its due diligence of Heartland under the terms of a letter of intent. The companies plan to enter into definitive purchase agreements by the end of September and tentatively plan to close the acquisition by the end of October.

Vertex said in a news release it will also provide consulting services to Heartland, which include advice and guidance related to Heartland Petroleums collection operations, Heartlands rerefinery, the installation of new equipment there, and the implementation of operational changes at the rerefinery. The objective is to eventually integrate Heartlands operations, allowing for a smooth transition upon the closing of the transaction.

We know theres going to be capital investment and changes we want to make, but we want to make sure theyre the right changes before we rush into it, Vertex Chief Financial Officer Chris Carlson told Lube Report. What were focused on day one from an operations standpoint is really their collection division. Were going in there and trying to help them put some efficiencies in place, put some technologies in place on their routing business, on the pay-for-oil side.

Carlson noted that Vertex was one of the third-party suppliers of used oil for the Heartland rerefinery. Weve been supplying oil – aggregating oil for them – probably four or five years now. Weve got a very good working relationship, which really dovetailed into this opportunity with them.

He said Vertex has a lot of business relationships nationwide. What we try to do from an efficiency and logistics standpoint is leverage those relationships and get the product to the nearest location instead of hauling it across the country, Carlson added.

This proposed acquisition will build on our acquisition of Omega Holdings rerefining assets and technical expertise, Vertex Chairman and CEO Ben Cowart said in a news release. The pending acquisition of Heartland will allow us to further enhance our flexibility in the marketplace, and will allow us to expand our national footprint, when operated together with our current facilities in the Gulf region and the West Coast and provide diverse finished product offerings throughout the United States.

In March, Vertex announced an agreement to buy Omega Holdings 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.

Vertex brings an industry perspective and technological expertise that is a strong fit with Heartlands core used oil collection and rerefining business, said Robert Schlott, chairman of Heartland. Schlott is also Chairman and CEO of Warren Distribution.

Heartland Group consists of Heartland Petroleum, which operates 21 trucks and five service locations covering used oil collection and related services in Ohio, Kentucky, West Virginia and Pennsylvania.

Vertex has agreed to cover expenses throughout implementation of the changes and to reimburse Heartland for any operating losses recognized after July 16, 2014, subject to a cop of $500,000 if Vertex decides not to move forward with the closing. Losses are reimbursable to Vertex if Heartland breaches the terms of the letter of intent. The acquisition remains subject to a variety of conditions.