Vertex Energy, Inc. Looking For Acquisitions

By Bayan Raji in Houston for MergerMarket Friday, February 19, 2016

Vertex Energy (NASDAQ:VTNR), the Houston, Texas-based industrial waste services group, is looking for acquisitions to expand its used oil collections business, CEO Ben Cowart said.

The company collects used motor oil, refines it, and then sells it to customers, often to be used as feedstock or replacement fuel.

Earlier this month Vertex sold its Nevada re-refinery facility to Clean Harbors Inc. for USD 35m, according to a press release. The company used a portion of the sale to pay down USD 16m on a loan from its senior lender Goldman Sachs, Cowart said. A portion of cash from the sale will help fund acquisitions, he said.

Houlihan Lokey acted as the exclusive financial advisor to Vertex Energy and Reinhart Boerner Van Deuren provided legal representation, according to a press release.

Acquisition targets will be small transportation companies that collect used oil, Cowart said. Owning collections businesses will benefit Vertex because it will provide more security around its supply and lower feedstock costs long-term, he said.

Low oil prices have led to a decline in revenue for many collection businesses, he said, because they are no longer able to charge as much for their products.

“Those companies are struggling and under a lot of pressure,” Cowart said. “If you don’t have a refinery to put the oil into you don’t have a lot of leverage in the market.”

Vertex Energy has refineries in Texas, Louisiana, Ohio and an agreement to use the facility it recently sold in Nevada, Cowart said. The company will expand street collections in all four regions, he said.

The company is evaluating opportunities to expand when the time is right, but Cowart said he expects more acquisitions to “play out” in 2017 because the market is still in flux.

In January Vertex said it would launch its own finished lubricant product. The company is exploring opportunities to acquire distribution companies

servicing that industry, Cowart said.

“I’d like to get fixed leverage around existing assets in our locations where we can collect waste from the customer and sell them finished lubricants back,” Cowart said. “We may look at the acquisition of a distributor and roll the collection business into the acquisition and get leverage that way.”

Advisors with acquisition targets in mind should contact Vice President of Business Development and M&A Alvaro Ruiz.

The company is also considering selling off additional assets, Cowart said. Vertex Energy has assets in Louisiana that are not being used and a Texas facility Cowart described as “strategic to other industries” that are “on the table” for discussion.

The purpose of potentially selling assets would be to obtain more liquidity for the company to expand its street collections unit, he said.

In 2013 this news service reported COO Matthew Lieb said Vertex Energy could possibly be a fit for a larger strategic that processes used oils in similar ways. Cowart said the company takes interest in the business seriously but that there are no discussions or work currently taking place to actively sell the business.

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