Safety-Kleen heads back to the public market

Plano, Texas-based Safety-Kleen, an oil recycling and environmental services provider, has filed for an initial public offering to raise up to $300 million.

The move comes more than four years after the company emerged from bankruptcy protection, and follows a major financial recapitalization of the group in 2006.

The specific terms and timing of the IPO were not disclosed. Merrill Lynch and JP Morgan are serving as co-lead underwriters on the planned share sale.

Safety-Kleen, which has a North American network of over 200 facilities in the U.S., Canada and Mexico, saw its fortunes tumble after its predecessor company was acquired by and merged with Laidlaw Environmental Services in 1998.

"The proposed financial and operational benefits of the merger were never realized," according to Safety-Kleen's filing with the U.S. Securities and Exchange Commission.

Safety-Kleen said its North America's largest collector, recycler and re-refiner of used oil. The company said it owns and operates the two largest oil re-refineries in North America, representing over 75 percent of North American re-refining capacity.

"In fiscal year 2007, we collected over 200 million gallons of used oil from automobile and truck dealers, automotive garages, oil change outlets, fleet service locations and industrial plants," said the filing.

The company said it re-refined and recycled approximately 140 million gallons of the used oil it collected, producing base and blended lubricating oils, which were then sold to third party distributors, retailers, governmental agencies, railroads and industrial customers.

"Based upon various studies, we believe re-refining used oil results in significant reductions in greenhouse gas emissions compared to the generation of virgin base oil," the company said in its filing.

Safety-Kleen also offers parts cleaning services, and collects and recycles used cleaning solvent, recycling approximately 14 million gallons during fiscal year 2007.

Hazardous and non-hazardous wastes are also handled by the company, which has a fleet of 240 vacuum trucks that can remove solids, residual oily water and sludge and other fluids from oil-water separators, sumps and collection tanks.

A large chunk of the company is now held by investors Highland Capital Management, Contrarian Capital Management, JPMorgan Chase, and the GSC Group, but the filing indicates that certain stockholders could be selling some shares.

Highland currently holds a 38 percent stake in Safety-Kleen, with Contrarian owning 19.8 percent, JPMorgan Chase holding 11.1 percent, and GSC owning 9.2 percent.

But back in March 2000, after almost two years under the Laidlaw management team, the SEC launched an investigation into alleged accounting irregularities at the merged company.

In June of that same year, the company filed for Chapter 11 bankruptcy protection, with its outstanding stock canceled as part of the bankruptcy proceedings.

A slimmed down Safety-Kleen emerged from Chapter 11 in December 2003, having divested its waste disposal assets and related environmental liabilities obtained from the Laidlaw merger.

A 2006 financial recapitalization included a $100 million rights offering and a six-year $395 million debt facility.

The clean-up firm's return to the stock market comes amid a rocky time for company's going public.

Last month, Voorhees, N.J.-based American Water Works (NYSE: AWK) finally made it onto the public market, but pulled in a lower-than-expected $1.25 billion after pricing 58 million shares at $21.50 per share (see American Water Works prices below range).

The company had planned to offer 64 million shares at $24 to $26.

American Water Works was originally set to float in 2007, but unfavorable market conditions caused parent RWE to pull the share sale last November.

And two biodiesel companies have withdrawn their plans to go public this year.

Ralston, Iowa-based Renewable Energy Group ditched its planned $150 million offering in March (see Renewable Energy Group cancels IPO).

In January, Seattle's Imperium Renewables canceled plans for a $345 million share sale (see Imperium Renewables puts IPO on hold).

But Safety-Kleen is a much larger company than Renewable Energy Group or Imperium Renewables, and it plans to grow.

Safety-Kleen said the cash it raises from the IPO will go for general corporate purposes, including working capital and capital expenditures and possibly to make acquisitions.

"We target 'tuck-in' acquisitions that offer access to new customers which can be serviced through our existing network without substantial additional capital investment," said the company.

Safety-Kleen said it also plans to pursue regional acquisitions, such as its acquisition in December 2007 of certain oil collection and environmental services assets of Advanced Liquid Recycling and United Oil Recovery.

The company said those deals provided additional logistics assets and the capability to collect increased volumes of used oil in the northeastern region of the U.S.

Safety-Kleen intends to float on the New York Stock Exchange under the symbol SK.

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