April 29, 2009 / 12:07 PM / in 9 years

UPDATE 3-Clean Harbors to buy Canada's Eveready, not to cut jobs

* Clean Harbors to buy Canada’s Eveready

* Sees deal immediately adding to earnings

* Deal will be a combination of cash, stock & assumed debt

* Clean Harbors says to maintain workforce at both cos

* Eveready shares triple, Clean Harbors up 9 pct (Recasts, adds analyst comments, updates share movement)

By Shradhha Sharma

BANGALORE, April 29 (Reuters) - U.S. waste-management company Clean Harbors Inc CLH.N said it will acquire Eveready Inc EIS.TO in a deal that valued the Canadian company at nearly three times its Tuesday close, to help broaden its industrial services market and expand its geographical footprint.

Shares of Clean Harbors rose as much as 9 percent on the New York Stock Exchange in a clear indication that investors cheered the acquisition plan. The stock price of an acquiring company normally dips post a merger announcement.

The deal offers Eveready shareholders a whopping premium of 200 percent, based on its Tuesday’s closing share price of Eveready shares of C$3.47.

“Its a good strategic fit for the company (for Clean Harbors). When you look at what they are buying, and the operating leverage that is forthcoming, it makes a lot of sense,” Wedbush Morgan analyst Al Kaschalk said by phone.

Norwell, Massachusetts-based Clean Harbors expects the deal to immediately add to earnings, excluding any one-time fees and acquisition-related expenses.

“We envision substantial cross-selling opportunities with Eveready’s blue-chip customer base, particularly with respect to refineries and other energy companies,” Clean Harbors said.

The combined entity following the completion of the deal will have $130 million in cash and $250 million in debt, Clean Harbors Chief Executive Alan McKim said on a conference call with analysts.

As the global economic downturn worsens, credit markets have also tightened, but Kaschalk said he didn’t see financing of deal becoming a concern for Clean Harbors.

DEAL DYNAMICS

As per the terms of the agreement, Clean Harbors will buy Eveready through a combination of cash, stock and assumed debt. If the deal fails to go through, a break up fee will be involved, but Clean Harbors executives did not quantify it on the call.

They, however added, that in case the acquisition does not materialize, Clean Harbors would buy a smaller portion of Eveready’s business, which equates $70 million in terms of Eveready revenue.

This would predominantly include Eveready’s landfill business in the United States, McKim added.

Earlier on Wednesday, Clean Harbors said it would acquire all of Eveready stock in exchange for $49 million in cash, or $2.64 for each Eveready share, and $118 million in Clean Harbors’ stock, which consists of 2.4 million shares (a ratio of 0.1304 Clean Harbors shares for each Eveready share).

CEO McKim said his company also expects to benefit from the “opposite seasonality” of Eveready’s business. While the first and fourth quarters are seasonally the weakest for Clean Harbors, Eveready sees a surge in its business during that time, he said.

Eveready, which provides industrial, oilfield maintenance and production services in 79 locations in Canada, the United States and internationally has over 2,100 employees and operates a service fleet of 2,400 trucks and trailer units.

Clean Harbors also said it will maintain current workforce levels at both companies. The company has about 4,808 employees, according to Reuters data.

“This is a growth strategy for us. This is not a headcount reduction plan. This is really how you take one and one and make it three. That is the real message here to both workforces,” McKim said during the call.

Shares of Eveready more than tripled to touch a high of C$10.72 and were trading up C$6.82 at C$10.29 on the Toronto Stock Exchange.

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