Heritage-Crystal Clean to be acquired by New York investment firm

Heritage-Crystal Clean Inc., an Elgin, Illinois-based provider of parts cleaning, hazardous and nonhazardous waste services, used oil rerefining, antifreeze recycling, industrial and field services and emergency and spill response services, announced that it has entered into a definitive merger agreement to be acquired by an investment affiliate of J.F. Lehman & Co. (JFLCO), a New York City-based private equity investment firm focused on the aerospace, defense, maritime and environmental sectors. The all-cash transaction values Crystal Clean at approximately $1.2 billion.

Under the terms of the merger agreement, JFLCO will acquire all the outstanding shares of Crystal Clean for $45.50 per share in cash. The purchase price represents a premium of approximately 24.9 percent to Crystal Clean’s 60-day volume-weighted average price July 19, the last full trading day prior to today’s announcement.

“We are pleased to enter into this agreement with JFLCO, which we believe represents the best path forward for Crystal Clean to maximize value for our shareholders,” says Crystal Clean President and CEO Brian Recatto. “For more than 20 years, we have executed … our mission and thoughtfully grown Crystal Clean to become the partner of choice nationwide for premier environmentally sustainable solutions that have a tangible impact [on] customers, and we are excited to embark on this new chapter.

“As a private company, we will have added flexibility and a deeply knowledgeable partner in JFLCO that understands our strengths and employee-empowered culture. We are grateful to our talented team, who have been instrumental in establishing Crystal Clean as the leader we are today and look forward to building on our momentum on the path ahead,” Recatto adds.

“At a time when businesses across industries are more environmentally conscious and highly focused on running cleaner, we are excited to partner with Crystal Clean—a clear category leader and unparalleled provider of environmental and waste disposal services,” says Glenn Shor, partner at JFLCO. “This partnership underscores our confidence in Crystal Clean’s business, vision and reputation as a trusted provider for a diversified, blue-chip customer base. We look forward to working closely together to best position the Company for sustainable, long-term success.”

Transaction details

Crystal Clean’s board of directors unanimously approved the merger agreement and recommends that Crystal Clean shareholders vote in favor of the transaction.

The transaction is expected to close in the fourth quarter of 2023, subject to customary closing conditions, including approval by Crystal Clean shareholders and the expiration of the waiting period under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976. Upon completion of the transaction, Crystal Clean will become a privately held company and shares of Crystal Clean common stock will no longer be listed on the Nasdaq Stock Exchange or traded in any other public market.

Fully committed debt financing in support of the transaction is being provided by Jefferies Finance LLC and Sumitomo Mitsui Banking Corp. The merger is not subject to any financing condition.

Additionally, The Heritage Group and its affiliates, which collectively hold 26.7 percent of the Crystal Clean common shares, and Recatto, who holds 3.23 percent of the Crystal Clean common shares, have each entered into a voting and support agreement with JFLCO pursuant to which each has committed to vote all its Crystal Clean common shares in favor of the transaction.

The merger agreement provides for a “go-shop” provision under which Crystal Clean and its Board of Directors may actively solicit, receive, evaluate and potentially enter negotiations with parties that offer alternative proposals during a 35-day period following the execution date of the definitive agreement.

William Blair & Co., Chicago, is the financial advisor to Crystal Clean; Stifel, St. Louis, Missouri, delivered a fairness opinion to Crystal Clean concerning the proposed transaction; and McDermott Will & Emery LLP, Chicago, serves as legal counsel.

Houlihan Lokey Inc., Los Angeles, is serving as lead financial advisor to JFLCO, and Jefferies LLC, New York City, is also serving as financial advisor to JFLCO; Shearman & Sterling LLP, New York City, and Jones Day, Cleveland, are serving as legal counsel to JFLCO.