Vertex Energy on Tuesday backed out of its deal to sell its used motor oil collection and rerefining business to Safety-Kleen Systems, saying that the expense of regulatory review had become too large to bear.
The sales agreement, first announced in June 2021, included provisions allowing either party to walk away unencumbered if the transaction was not finalized by March 31 of this year, according to a press release by Safety-Kleen parent company Clean Harbors. For exercising that provision, Vertex is obligated to pay Clean Harbors a $3 million break-up fee.
Safety-Kleen, North America’s largest rerefiner of used lubricants, was to have paid $140 million for Vertex’s API Group II Heartland base oil rerefinery in Ohio, a second rerefinery in Louisiana and Vertex’s used oil collections businesses.
Following a prolonged period of regulatory review with the U.S. Federal Trade Commission, which both companies were actively engaged in, Vertex said that it had determined that it was no longer in its best interest to pursue the transaction and that Safety-Kleen had agreed to the termination.
“Given the considerable time and resources required to support what has become a costly and time-consuming regulatory review of our planned asset divestiture to Safety-Kleen, we have decided to terminate the sale,” Vertex President and CEO Benjamin Cowart said in a press release. Vertex is based in Houston.
“Clean Harbors and Vertex have mutually agreed to terminate the transaction,” Clean Harbors Chairman and CEO Alan McKim said. “We can now refocus our energy on other ways to deploy our capital, including continuing to invest in our Safety-Kleen Sustainability Solutions segment.”
When they announced the sale in June, Vertex and Clean Harbors said they expected it to close in the third quarter, subject to approvals and conditions. However, in September, the U.S. Federal Trade Commission made a second request for additional information about the deal, extending its review period by 30 days.
In the second quarter this year, Vertex expects to close on an acquisition of a Mobile, Alabama, oil refinery from Equilon Enterprises LLC, doing business as Shell Oil Products US, Shell Oil Co. and Shell Chemical LP. Vertex plans to convert the facility to make renewable fuels as it pivots to focus on that business.
“Currently, our used motor oil and rerefining assets are performing well ahead of prior-year levels, given improved product spreads and margin realization,” Cowart said. “At a strategic level, these assets complemented our planned entry into renewable diesel production at the Mobile refinery, consistent with our long-term commitment to a lower-carbon future.”
Clean Harbors, which has five base oil rerefineries in the United States and one in Canada, had expressed enthusiasm about expanding through the purchase from Vertex. Acquired by Vertex in 2014, the Heartland rerefinery in Columbus has capacity to make 55,000 metric tons per year of Group II base oils and can process up to 20 million gallons per year of waste oil. The deal would have included a rerefinery in Marrero, Louisiana, which can process up to 69 million gallons per year of waste oil and produce vacuum gas oil.
Clean Harbors was also keen on how Vertex’s waste oil collection and branch footprint would complement its existing network of locations and expand its service capabilities in several key states. The deal would have included Vertex’s H&H and Heartland used oil collections business and 17 service branches throughout the Midwest and U.S. Gulf Coast region, supported by about 200 employees and a fleet of collection vehicles. Other assets that were to be acquired include the Cedar Marine terminal in Baytown, Texas, and the Nickco oil filters and absorbent materials recycling facility in East Texas.