US Ecology, a Boise, Idaho-based provider of environmental services, has been in business since 1952, growing for more than six decades via organic growth as well as acquisitions. Its recent growth endeavor is its merger with NRC Group (NRCG), a Houston-based provider of comprehensive and safety-driven solutions for the oil and gas, transportation, chemical, industrial, power and government sectors.
The deal, which was finalized in November via an all-stock transaction with an enterprise value of $966 million, has created one national provider of industrial and hazardous waste management services. The combined company now has more than 3,800 employees working in 13 countries in more than 130 locations.
"NRC brings highly complementary services and customers to US Ecology through its substantial nationwide service network, creates a leadership position in standby and emergency response services [and] expands the scale of key service verticals to drive volume to US Ecology's fixed facilities while adding specialty waste landfill disposal capabilities focused on oil and gas exploration,” said Jeffrey R. Feeler, president, CEO and chairman of the board of directors at US Ecology, in a statement. “We believe the combination creates a true leader in industrial waste management and environmental services that will harness the experience and expertise of each organization to enhance our competitive position, create cross-selling opportunities and operational efficiencies and provide compelling long-term value to both our customers and stockholders."
US Ecology owns and operates five hazardous waste landfills, three energy waste landfills and one radioactive waste landfill. It also has 20 treatment and recycling centers and more than 100 service centers throughout North America.
Through the merger with NRC, US Ecology has expanded its geographic footprint and service portfolio, which now includes offerings such as emergency and spill response services, light industrial services, hazardous and industrial waste management and transportation services.
“NRCG will bring highly complementary services and customers to US Ecology and will position the combined company as a leading player in industrial waste management while strengthening its position in the overall environmental services market,” said Christian T. Swinbank, president and CEO of NRCG, in a statement. “We believe the combination will provide compelling upside for stockholders of both companies.”
How the Deal Came Together
US Ecology and NRC have been doing business together for quite some time, and when US Ecology learned that NRC was considering a strategic review and possibly exploring combination activity, the company acted quickly.
The two companies had many discussions, and a mutual conclusion was reached for the companies to combine as one to strengthen each other’s position in the marketplace while providing additional needs to the industry.
US Ecology hired a number of experts to help advise the company throughout the transaction process, and it leveraged its board of directors, internal teams and outside expertise to further understand the overall marketplace and the benefits of completing the transaction.
“I’m not going to say [the deal] went perfectly smooth because no deal does, but at the end of the day, both companies saw the value of the combination and that put us on the same playing field,” says Feeler.
There were many key aspects that mattered to US Ecology as it negotiated the merger agreement, including value, maintaining a strong balance sheet, ensuring the company stayed in a position to pursue other opportunities down the road and retaining NRC’s key talent.
“One of the things that really attracted us to NRC was its talent, workforce, commitment to safety and compliance and culture, which aligns with ours,” says Feeler. “What makes US Ecology successful is our people, and our people really help develop and define our culture, which drives our mission and vision to protect human health and the environment. It’s part of our job now to ensure NRC employees know who US Ecology is and how they fit into our culture.”
Details of the Deal
The merger, which was approved by both companies’ boards of directors, was first announced in June 2019 and finalized a few months later in November via an all-stock transaction with an enterprise value of $966 million. The now combined company retains the US Ecology name and is traded on the Nasdaq Global Select Market under the ticker ECOL.
US Ecology stockholders received a fixed exchange ratio of 1.00 share of new US Ecology for each share held, and NRC Group stockholders received a fixed exchange ratio of 0.196 shares of new US Ecology for each NRC share held. In addition, each share of NRC's 7.00 percent Series A Convertible Cumulative Preferred Stock was converted into approximately 1.8 common shares of new US Ecology. As a result, US Ecology stockholders own approximately 70 percent of the combined company, and NRC stockholders own approximately 30 percent on a fully diluted basis.
Additionally, NRC's 19.249 million outstanding warrants were converted to 3.773 million warrants to purchase common stock of US Ecology, with a strike price of $58.67 each and expiration in October 2023. These warrants now trade under the ticker ECOLW on the Nasdaq Global Select Market as of November 1.
Strategic benefits of the merger include:
- Expanding leadership in specialty and industrial waste services. The merger supports US Ecology’s vision of becoming the premier provider of comprehensive environmental services by adding high-quality landfill disposal assets, a complementary new oil and gas exploration and production waste stream and an expanding scale of key service verticals that drive volume to US Ecology’s fixed facilities.
- Establishing a leadership position in marine- and land-based emergency response, including a premier standby network. As a nationally recognized Oil Spill Removal Organization, NRCG generates a recurring, compliance-driven revenue stream, with upside from spill events and international expansion, particularly in Mexico and Canada. The acquisition adds more than 50 additional service sites that provide emergency response services, light industrial services and waste handling to drive recurring base business through US Ecology’s national service network.
- Providing a National Service Network, which is consistent with US Ecology’s growth strategy. The addition of more than 50 service sites will provide a platform to support other field services offered by US Ecology, including retail compliance, lab pack and less than truckload waste transportation.
- Providing significant opportunities for synergies, with return on invested capital projected to exceed the cost of capital in the first full year. According to the companies, this is a highly accretive transaction with synergies of approximately $20 million and potential for upside through realization of additional revenue and cross-selling opportunities.
- Drawing upon the collective talents of both companies. The combination of US Ecology and NRCG is intended to create a “best-of-breed enterprise that will harness the experience and expertise of each organization to ensure that customers benefit fully from their complementary capabilities.”
The Integration Process and Next Steps
Integration began early after the merger announcement, and on November 1, US Ecology executed on its integration strategy. There are about 50 people helping to drive the integration process, from systems, to people, to operations, to processes, to financials, etc., according to Feeler.
“When I look at US Ecology, I’m excited about what I’m seeing,” says Feeler. “Our growth period has been heightened this year by the NRC merger, and we’re off to a great start in combining a truly great platform with a team member that’s really dedicated to providing the customer service experience that US Ecology is known for.”
“On the very first day as a combined company, we had a call come into our NRC team regarding a large oil spill in North Dakota. Within hours, we had a joint team onsite helping to clean that up, and that really shows how quickly we can respond and how the companies are coming together as one,” he adds. “It was exciting to see that happen, and at the end of the day, this is just one of the many examples we’ll be able to share going forward about how we’re becoming an industry leader in the space and how we’re committed to protecting human health and the environment.”
Looking to 2020 and beyond, Feeler says US Ecology is focused on further executing its integration plan and continuing to apply its disciplined strategy, which includes investing in the company, looking for areas to add new technology, new services and new capabilities and identifying tuck-in acquisitions to bolster its capabilities throughout its network.