Vertex Energy exits used motor oil collection and recycling

Vertex Energy, Inc. has entered into a definitive agreement to sell its portfolio of used motor oil collection and recycling assets to Safety-Kleen Systems, Inc., a subsidiary of Clean Harbors, Inc.

The transaction is valued at USD140 million, subject to working capital and other adjustments. The transaction is expected to close during the third quarter of 2021, contingent upon regulatory clearance, various customary closing conditions and the approval of Vertex shareholders.

Under the terms of the agreement, Safety-Kleen will acquire the 69 million gallon per year Marrero used oil refinery in Louisiana; the 20 million gallon per year Heartland used oil refinery in Ohio; the H&H and Heartland used oil collections business; the Nickco oil filters and absorbent materials recycling facility in East Texas; and the Cedar Marine terminal in Baytown, Texas. 

Collectively, these assets generated first quarter 2021 operating income of USD4.5 million and Adjusted EBITDA of USD5.7 million.

After retiring USD6.3 million in term debt, together with the payment of transaction-related fees and financial obligations, total net cash proceeds from the transaction to Vertex are expected to be approximately USD90 million. 

A portion of the gross cash proceeds from the transaction is planned to be used by Vertex to exercise its option to repurchase Tensile Capital’s interest in the Myrtle Grove facility located in Belle Chase, Louisiana, thereby allowing Vertex to resume 100% ownership in the asset. 

Net cash proceeds from this transaction, together with a planned USD125 million term loan facility, are sufficient to support the company’s near-term funding requirements without the issuance of common equity.

Vertex intends to commence development of a renewable feedstock pre-treatment unit at Myrtle Grove beginning in the fourth quarter of 2021. This project will provide increased feedstock processing optionality, positioning the company to achieve a lower landed cost of feedstock, over the long term. 

Upon completion of the project by year-end 2023, Vertex anticipates the new pre-treatment capability will generate between USD75 to USD100 million of incremental Adjusted EBITDA annually. The initial anticipated capital expenditure related to the development of the pre-treatment unit is estimated to be approximately USD40 million.