Texas lawyers at Shearman & Sterling advised J.F. Lehman & Co. on its proposed acquisition of publicly traded cleaning and disposal services provider Heritage-Crystal Clean Inc. for $45.50 per share, which values the company at around $1.2 billion including net debt.
The transaction, announced after the markets closed on Wednesday, has to clear shareholders and regulators but is expected to close in the fourth quarter.
The team also included partners Gillian Moldowan, Bill Nelson, Todd Lowther, Scott Cohen, Ben Gris and Alan Goudiss, counsels JB Betker, Jason Pratt, Jon Cheng, Rebecca Schumm and Judy Little and associates Kyle Park, Matthew Weston, Ira Aghai, Janice Perri, Eric Dunbar, Emily Kelly, Michael Buiteweg and Sam Guggenheimer.
Dermarkar has advised the private equity firm before, including on its sale of Lone Star Disposal to Waste Connections Inc. this past August for an undisclosed sum. And in late 2021, he counseled it on its purchase of defense manufacturer Narda-MITEQ from L3Harris Technologies, also for undisclosed terms. He advised the client previously at Jones Day.
Jones Day advised JFLCO on the debt financing, including Chip Bensinger in the New York office. Jefferies Finance and Sumitomo Mitsui Banking Corp. provided fully committed financing.
McDermott Will & Emery counseled Crystal Clean, including Heidi Steele, David Lipkin and Ann Marie Brodarick.
William Blair & Co. served as financial advisor to Crystal Clean led by Jamil Ali and Stifel delivered the company with a fairness opinion.
Houlihan Lokey Inc. is lead financial advisor to JFLCO led by Scott Sergeant. Jefferies also served as financial advisor, including Lawrence Lin.
The Heritage Group, which owns 26.7 percent of Crystal Clean’s common shares, and Brian Recatto, Crystal Clean’s president and CEO who holds 3.23 percent, entered into a voting and support agreement with JFLCO in favor of the transaction.
The merger agreement provides for a “go-shop” provision in which Crystal Clean and its board may actively solicit, receive, evaluate and potentially enter negotiations with parties that offer alternative proposals during a 35-day period following the execution date of the deal, which expires on Aug. 23.
While some shareholders might be disappointed by the offer’s 8.5 percent premium, they still are likely to vote in favor of the transaction, according to Truist analyst Tobey Sommer as quoted on the financial website Seeking Alpha.
“In our view, HCCI’s lack of disposal assets (i.e., haz waste landfills) and outsized exposure to base oil pricing make the company a less attractive acquisition target to larger environmental services peers,” Sommer wrote in a note.
In the same article, Baird analyst David Manthey wrote his firm had speculated that Clean Harbors, or CLH, would be a natural fit as an acquirer of Crystal Clean. And with the implied valuation low relative to CLH’s current next 12 months multiple, “We consider it highly likely that CLH/other suitors offer a competing bid.”
Hoffman Estates, Ill.-based Crystal Clean provides parts cleaning, used oil re-refining, hazardous and non-hazardous waste disposal, emergency and spill response and industrial and field services to vehicle maintenance businesses, manufacturers and other industrial businesses as well as utilities and governmental entities.
New York-based JFLCO is focused on the aerospace, defense, maritime and environmental sectors. The firm has $4.5 billion of assets under management.