Clean Harbors has entered into an agreement to acquire environmental and emergency response firm HEPACO from Gryphon Investors for $400 million, the companies announced Tuesday. The all-cash deal is expected to close in the first half of this year.
Based in Charlotte, North Carolina, HEPACO serves more than 40 regional locations across 17 states stretching from the Eastern Seaboard to Chicago and St. Louis. Private equity firm Gryphon acquired the company in 2016 and more than tripled its revenue since then, according to a release from the firm. HEPACO, which is an acronym for Hazardous Environmental Products Abatement Company, has completed seven add-on acquisitions with Gryphon Investors.
The deal will "accelerate the growth" of Clean Harbors' environmental services segment, co-CEO Eric Gerstenberg said in a statement.
"When providing emergency services, scale and rapid response capabilities are critical. HEPACO’s geographic footprint, trained personnel and equipment fleet will enhance our existing business, enabling us to gain efficiencies and offer an even broader range of solutions," Gerstenberg said.
HEPACO operates a fleet of more than 900 vehicles and employs about 1,000 people. The company is expected to generate $270 million in revenue for 2023, per the release.
Clean Harbors expects cost synergies of about $20 million between its existing services and HEPACO's after a year of combined operations. Those synergies include subcontracting, branch network, asset rentals, transportation and procurement, according to the release. Clean Harbors also cited HEPACO’s rail and marine service capabilities and the opportunity to cross-sell its existing industrial and hazarodus waste disposal services to HEPACO’s customer base.
HEPACO also run a national operations center that "provides 24-hour coverage across the continental U.S. through a network of contractors," per the release. HEPACO CEO Robb Schreck said the deal would provide his company’s customers with greater resources and “access to North America’s largest network of permitted disposal and recycling assets” in a statement.
“Given its leading position in environmental and field services, as well as a 40-year history in emergency response, Clean Harbors is an ideal fit," Schreck said.
Clean Harbors has made a series of major acquisitions in recent years as it looks to expand its business. Last year, the company acquired Thompson Industrial Services in another all-cash deal for $110 million. At the time, co-CEO Mike Battles said that deal would enhance the company's position in the Southeast and help Clean Harbors sell additional services to its environmental services customers.
The environmental services segment has provided growth for the company at a time when its Safety-Kleen Sustainable Solutions business has suffered from low base oil prices. The company closed the third quarter of 2023 with year-over-year revenues down more than 20% in the SKSS segment, but up nearly 6% in the environmental services segment. Clean Harbors' overall revenue for the quarter was $1.37 billion, up less than a percentage point year over year. The company has not yet scheduled its fourth quarter earnings release.
The company has seen other changes in recent years, as founding CEO Alan McKim announced in 2022 that he was stepping back into an executive chairman role. The company elevated Battles and Gerstenberg to co-CEOs to take his place. The new leaders have said they are optimistic about the direction of the company, as capital expenditures wind down on an incinerator in Kimball, Nebraska, and revenues recover in the SKSS business.
Editor’s note: This story has been updated with additional information about HEPACO from Gryphon Investors.