- Heritage-Crystal Clean, an Illinois-based provider of hazardous and non-hazardous waste services, announced an agreement on Wednesday to be acquired by an affiliate of private equity firm J.F. Lehman & Co. for $1.2 billion.
- J.F. Lehman will acquire all outstanding shares of the company for $45.50 per share in cash. The deal remains subject to shareholder and regulatory approval, with a Q4 closing target.
- “We are pleased to enter into this agreement with JFLCO, which we believe represents the best path forward for Crystal Clean to maximize value for our shareholders,” said President and CEO Brian Recatto in a statement. “As a private company, we will have added flexibility and a deeply knowledgeable partner in JFLCO that understands our strengths and employee-empowered culture.”
This transaction marks the latest sign of investor interest in environmental services. While this sector has seen some recent consolidation, such as Republic Services’ $2.2 billion purchase of US Ecology in 2022, it remains more fragmented relative to the solid waste sector.
The company launched in 1999 when Heritage Environmental Services spun off its Crystal Clean division through an agreement with founder Joe Chalhoub. It went public in 2008 and continued to grow through various acquisitions, such as the purchase of wastewater assets from FCC Environmental and Patriot Environmental.
According to its latest annual report, Crystal Clean offers parts cleaning; hazardous and non-hazardous bulk and containerized waste management; used oil collection, re-refining and lubricating base oil product sales; wastewater vacuum services; antifreeze collection, recycling and product sales; industrial and field services; and emergency and spill response services.
Earlier this year, the company estimated it was the second-largest North American provider of parts cleaning, used oil collections services and hazardous and non-hazardous waste services. Crystal Clean also describes itself as North America’s second-largest used oil re-refiner (by capacity) and the second-largest producer of remanufactured antifreeze. Its largest competitor in multiple categories is described as Clean Harbors subsidiary Safety-Kleen, with no other notable competitor listed.
The deal includes a “go-shop” provision, which allows Crystal Clean and its board of directors to consider any alternative proposals through the end of Aug. 23, leading to initial speculation among analysts about whether a company such as Clean Harbors might enter a bid. Crystal Clean’s board has approved the merger agreement and recommended that shareholders vote for the J.F. Lehman transaction.
Debt financing for this transaction is set to be provided by Jefferies Finance and Sumitomo Mitsui Banking Corp. Houlihan Lokey is the lead financial advisor to J.F. Lehman on the transaction.
According to its latest ESG report, released in August 2022, Crystal Clean runs “more than 90 service branches and multiple waste recovery centers, including an oil re-refinery, antifreeze recovery centers, and wastewater treatment facilities” in the U.S. and Canada. At the time it reported servicing more than 100,000 customer locations via more than 990 vehicles.
In recent years, Crystal Clean has also partnered with companies such as Battelle and Allonnia on PFAS destruction, and it partnered on lithium-ion battery recycling with Retriev, among other ventures.
Crystal Clean reported $193.5 million in revenue and $16.6 million in net income for Q1, with the company noting positive organic growth trends in multiple segments.
“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 — a clear category leader and unparalleled provider of environmental and waste disposal services,” said Glenn Shor, partner at J.F. Lehman & Co, in a statement.
Among other recent J.F. Lehman transactions in the waste sector is the 2022 sale of Lone Star Disposal to Waste Connections.