What happened
Shares of Vertex Energy (VTNR 33.78%), a specialty refiner of alternative feedstocks, fell sharply in early trading on Tuesday, losing roughly 13% of their value. The big news here was released this morning and related to a planned asset sale to a division of Clean Harbors (CLH -0.46%).
So what
Vertex Energy agreed to sell motor-oil recycling assets to Safety-Kleen, which is owned by Clean Harbors, for $140 million in late June of last year. Proceeds from the sale were expected to be used to increase its ownership stake in key assets and to fund capital investment plans, among other things. In other words, this deal was a pretty important part of Vertex's future.
Image source: Getty Images.
There were headwinds pretty early in the process, including Vertex receiving a request for additional information from the Federal Trade Commission (FTC) in late September. Although the company was working with the FTC, it decided that the cost and effort to get this deal past regulatory scrutiny was too great (Vertex is, after all, fairly small with a tiny $235 million market cap). Clean Harbors agreed, and the pair canceled the deal. Given the importance of the sale to Vertex's long-term plans, investors decided they were less than happy with this decision.
Now what
Vertex tried to put a positive spin on the failed sale, noting that the motor oil recycling assets it was going to sell are performing well right now. It also highlighted the fact that they are a strategic fit with its other long-term plans in areas like renewable diesel.
But the cash that would have been generated from the sale will now have to be found elsewhere, with the company noting that a recent convertible bond sale has provided it with sufficient liquidity to execute on its investment and acquisition plans. But investors still seem to think paying with cash from the sale would have been preferable to debt-funded spending. That's not unreasonable.
