Is anyone paying attention to this? Badger shot down Clean Harbors CAD $20.50 per share buyout bid on Tuesday. Badger probably realized that it could be sitting on a goldmine (oil sands), and a ~7.5% premium bid for the company was not in their best interest. This is a company that was expected to add ~$140 million in annual revenues and ~$40 million in annual EBITDA to a company that earned $1731 million in revenues and $315 million in EBITDA in 2010.
By those numbers, not that big of a miss, right? Wrong. Badger was a key piece to the build-out of its Canadian Oil Sands play, and had a 5000+ strong customer base with plentiful cross-selling opportunities for U.S. customers. The company also had a very impressive 29% EBITDA margin compared to CLH's five-year average EBITDA margin of 15.4%. Let's review CLH's careful construction of its position in Canada:
- 2008: Acquired Eveready - a Canadian-based company that provides industrial/energy-related services to oil, gas, and manufacturing industries. Eveready provides lodging for workers in the oil sands regions - unique play on oil growth. The deal was valued at $56 million in cash plus $118 million in CLH stock, and the assumption of $235 million in net debt. Status: Complete
- 2011: Badger Daylighting Purchase. Badger is North America's largest provider of hydrovac services, which are used for safe digging in the utility and petroleum industries. The deal was valued around CAD $247 million - all cash. Status: Rejected
- 2011: Peak Energy Services Acquisition. Peak provides drilling/production equipment and services to oil and natural gas customers in the U.S. and Canada. The deal is valued at ~$196 million - with CLH paying $161 million in cash and the assumption of $35 million in net debt. Status: Pending Approval
With its recent acquisitive behavior, Clean Harbor's thought it was playing a game of chess, but with Badger off the table, the company is looking like the loser in a game of kindergarten dominoes - or perhaps worse - Jenga. With this loss, I expect EBITDA to be at the low end of management's 2011 guidance, maybe even treading below the $262 million low-end estimate and revenues reflecting lower esimates as well. Revising estimates may not be necessary, however, considering that management's 2011 guidance excluded Badger revenues/synergies. Alas, still a loss for a company that probably saw some uptick in share price from investors that assumed this deal would go through.