New Accretive Acquisition Sets The Stage For Advance In GlyEco Shares

| About: GlyEco, Inc. (GLYE)

A Top Pick for 2013

Since my last Seeking Alpha report on GlyEco (OTCPK:GLYE) last August the company has made noteworthy progress in its strategy of acquiring companies that produce Type 2 glycol from wastes used in the manufacturing of glycol products and or their disposal.

For those new to the story GlyEco owns the only technology that can take hazardous glycol waste and produce the premium Type 1 ** virgin glycol indistinguishable from refinery grade glycol. In less than a year GlyEco has inked seven accretive acquisitions and in the last four months, four have now been finalized. Imagine a company that can acquire a toxic throwaway hazardous waste for about zero, process it and then sell it for $5.60 a gallon - and there's about a billion gallons of the waste to access.

The asset purchase of the subject Elizabeth, New Jersey company that has grown to be one of the largest Type 2 glycol recyclers was recently concluded and GlyEco is now expecting to produce the premium Type 1** refinery grade glycol on schedule in Q1 2013.

Management previously created the very successful $15.6 billion Waste Management so they have experience in growing and operating big deals. Hold those thoughts and - read on as I believe there could be multiple bags in this one that far outweigh the risks.

Think of the amount of polyester fibers, plastic bottles, airplane de-icing fluid, antifreeze and air conditioning fluid that all are made of glycol and you get the picture. It's a ubiquitous material and there is an enormous amount of toxic waste created in their manufacturing and or their disposal and because of its noxious chemistry it's a regulated hazardous waste. So it's a green deal to boot.

Glycol right out of the refinery is sold for say $5.60 a gallon and the world uses 5.5 billion gallons ($30 billion a year) to make; polyester fibers, antifreeze, plastic bottles and containers etc… To make all this about 20% goes to waste and is currently disposed of with miniscule recovery. Importantly, it's a business model that goes on recession or no.

The Impact of the Just Completed Full Circle Deal

The NJ facility is already one of the highest capacity Type 2 glycol recycling operations in the world and the Type 1 technology roll-out plan doubles that capacity - to over 20 million gallons per year. My analysis indicates that GlyEco reaches the break-even point at about 1 million gallons and I anticipate that they will reach that threshold as the company states in Q1 2013 and ramp to 10 million gallons per year run-rate by year end 2013.

The NJ facility will be the world's first operation producing Type 1 glycol** and is the cornerstone of their strategy for introducing their patent-pending GlyEco Technology™ producing Type 1 material into the global market; and it's the first technology to clean all types of waste glycol. The new facilities footprint size, location, shipping capabilities and rail access position it to take in very large quantities of non-antifreeze waste feedstock. The facility also has over 3 million gallons of glycol storage capacity with space available for expansion of storage and processing capacities.

The acquisition of the waste glycol costs about nil and in some instances you can be paid to pick it up. Now, by using GlyEco's breakthrough and disruptive technology virgin glycol can be produced from the former waste and then sold immediately to a hungry worldwide market. The average sales price of ethylene glycol in 2011 was approximately $5.69 per gallon so you can grasp the value / profit potential. Buying it low and selling it high brings a sky high EBITA to this story. Hence the profit outlook should be exceptional.

More re Management

Central to GlyEco's acquisition strategy is that it's being orchestrated by Waste Management's creator John Lorenz, GlyEco's CEO. Waste Management grew in seven years from $2 million in revenues to $14 billion through a series of acquisitions of smaller cartage / garbage / waste companies. GlyEco's management team is seasoned in the operational details of big-footprint commercial applications. The team is comprised of experts in solid waste management, mergers and acquisitions, chemical engineering, and glycol recycling.

Regarding Financials and Risk

To date GlyEco has raised a total of $10.9 million and has already closed on its first four (4) acquisitions with four (4) additional acquisitions scheduled for 2013. The future scheduled acquisitions are subject to further capital injections that I believe GlyEco has the resources to complete via cash flows and their recent raise of $4.2 million. So by my count; fully diluted you're at about 35 million shares.

There are perils in acquisitions with unexpected increases and complexities in dealing with the multiplication of moving parts while orchestrating the benefits of centralization and integration of multiple and growing entities can be a challenging undertaking. In many cases much of senior management's time is spent in quenching fires and coordinating disparate happenings; rollups are definitely not a sure thing. Yet assuredly, while previous experience is no guarantee of future success, investing alongside Lorenz, who has 35-years of experience coupled with a solid track record of orchestrating successful acquisitions, provides better leadership and knowhow than a person who has no experience at all.

Going Forward; a New and Disruptive Technology Enters the Global Market

While GlyEco is just recently operational with the four accretive and closed deals already in production of recycled anti-freeze grade Type 2 glycol, the newly inked New Jersey operation sets in motion a new and disruptive breakthrough technology producing the Type 1 glycol, the same level of purity expected of refinery grade glycols and sell it into a wide-open world market. GlyEco has further identified additional potential customers and developmental partners in North America, Europe, throughout Asia, Mexico, South America, India, and Australia.

Using the above-mentioned markedly successful Waste Management roll-up as a model, I believe that GlyEco's management will complete additional accretive acquisitions along the lines of the seven recently announced deals. In my opinion, revenues and profits should expand noticeably as the acquired assets upgrade to the GlyEco technology producing Type 1 material and that news flow will drive share price. With a market cap of only $44 million I can envision it escalating in relatively short order as Waste Management's did in its early days if management keeps up the same growth pace - hence, my optimistic outlook re the GlyEco shares.

The patent-pending GlyEco Type 1 recycling process is the only technology that can process and clean all five types of hazardous waste glycols to meet or exceed ASTM standards indistinguishable from refinery grade glycol. Furthermore, the US Environmental Protection Agency [EPA] requires most federal agencies buy products like antifreeze with the highest recycled content level practical. Most federal agencies report a lack of supply of recycled glycol to meet their demand.

The glycol waste data I use is compiled and verified by several sources including the U.S. Government, reporting from each of the five industries, as well as distributors and customers, e.g. Dow Chemical, the world's largest producer, MEGlobal and SABIC within each industry. In addition, ICIS Chemical News is the most reliable source for allocation breakdowns of global glycol distributions as it is the world's largest petrochemical information provider.

Recent News Flow, SEC Filings & the 7 deals since February;

The recent news flow paints the picture of management's ability to execute on their strategy. Multiple closings of the accretive deals that were first announced earlier this year have been filed with the SEC and press releases have been generated. Add the recently completed PPO offering and it sets-up the ability for GlyEco to continue their move forward on all fronts. For more information, visit the GLYE website here.

Disclosure: I am long (OTCPK:GLYE). I purchased shares on the open market and will likely buy more. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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