US Ecology agrees to buy PE-owned EQ for $465 mln

US Ecology has agreed to acquire EQ, a portfolio company of private equity firm Kinderhook Industries, for $465 million. The transaction is expected to be completed in either the second or third quarter of 2014. Houlihan Lokey is advising US Ecology on the deal while Stifel is advising EQ. Wells Fargo Securities and Credit Suisse Securities are arranging for the financing. Based in Wayne, Michigan, EQ is an environmental services and waste management firm.

PRESS RELEASE

BOISE, ID–(Marketwired – Apr 7, 2014) – US Ecology, Inc. (NASDAQ: ECOL) (“the Company”) today announced that it has entered into a definitive stock purchase agreement to acquire EQ – The Environmental Quality Company (“EQ”), a fully-integrated environmental services and waste management company based in Wayne, Michigan, with facilities throughout the Eastern United States. EQ is owned by an affiliate of New York based private equity fund Kinderhook Industries, LLC. The transaction, valued at $465 million, is expected to close in the second or third quarter of 2014 and is subject to customary closing conditions, and a purchase price adjustment based on working capital. The acquisition is expected to be accretive to adjusted earnings per share for the full year 2014.
EQ is a comprehensive solutions provider offering a broad line of environmental services including treatment and disposal of hazardous wastes, recycling, field and industrial services and total waste management. EQ’s facilities include one hazardous waste permitted landfill located outside of Detroit, Michigan, 13 waste treatment and recycling facilities and 21 dedicated service centers. EQ employs over 1,250 employees and services more than 6,000 active customers.
“The addition of EQ to US Ecology’s family of permitted facilities will provide us with an expanded environmental services platform, broadening our geographic footprint and providing for a greater array of services to better meet the needs of our customers,” commented Jeff Feeler, President and CEO. “In addition to its high quality, complementary assets, like US Ecology, EQ has a strong, uncompromising commitment to environmental, health, and safety compliance, engendering the trust of customers, employees and the broader community. We expect that the combination of US Ecology and EQ will result in cross-selling opportunities, transportation synergies and efficiencies of scale, delivering compelling value for our customers and stockholders as well as further opportunities for long-term growth.”
Financial Highlights
EQ generated pro forma revenue of approximately $376 million after pro forma adjustment for its 2013 acquisition of Allstate Power Vac, Inc. and adjusted pro forma EBITDA of approximately $54 million for the year ended December 31, 2013. Though US Ecology is not updating guidance at this time, the transaction is expected to be immediately accretive to adjusted earnings per share before synergies. Adjusted EPS, excludes transaction expenses and other nonrecurring items. A calculation of adjusted pro forma EBITDA is included on page 16 of the presentation filed with the SEC as an exhibit to our Form 8-K filed on April 7, 2014.
Financing of the transaction
The total purchase price of $465 million will be financed using a combination of cash on hand and committed debt financing, consisting of a new $540 million credit facility made up of approximately $415 million in a 7-year Term Loan and a $125 million 5-year Revolving Credit Facility. The closing of the financing is subject to customary closing conditions.
Advisors
Houlihan Lokey is serving as US Ecology’s financial advisor and Stoel Rives LLP and Dechert LLP are serving as legal counsel. Stifel is serving as EQ’s financial advisor and Kirkland & Ellis LLP is serving as legal counsel. Wells Fargo Securities, LLC and Credit Suisse Securities (USA) LLC are acting as Joint Lead Arrangers for the financing.
Conference Call
US Ecology, Inc. will hold an investor conference call on Monday, April 7, 2014 at 9:00 a.m. Eastern Daylight Time (7:00 a.m. Mountain Daylight Time) to discuss this pending acquisition. Questions will be invited after management’s presentation. Interested parties can join the conference call by dialing (866) 318-8612 or (617) 399-5131 and using the passcode 86175725. The conference call will also be broadcast live on our website at www.usecology.com. An audio replay will be available through April 14, 2014, by calling (888) 286-8010 or (617) 801-6888 and using the passcode 90660711. The replay will also be accessible on our website at www.usecology.com.
About US Ecology, Inc.
US Ecology, Inc., through its subsidiaries, provides radioactive, hazardous, PCB and non-hazardous industrial waste management and recycling services to commercial and government entities, such as refineries and chemical production facilities, manufacturers, electric utilities, steel mills, medical and academic institutions and waste brokers. Headquartered in Boise, Idaho, the Company is one of the oldest radioactive and hazardous waste services companies in North America.