Clean Harbors Inc (CLH), Waste Management, Inc. (WM): This Waste Disposal Company Looks Interesting After the Recent Acquisition

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Clean Harbors Inc (NYSE:CLH) has not been performing well on the market since the beginning of 2012. The stock’s price has declined from around $64 per share at the beginning of 2012 to $54.80 per share at the time of writing. As of March 2013, Clean Harbors Inc (NYSE:CLH) is in the portfolio of Ron Baron and Steven Cohen. Is it a good buy at its current price? Let’s find out.

Clean Harbors Inc (NYSE:CLH)Great strategic acquisition

Clean Harbors Inc (NYSE:CLH), incorporated in 1980, is considered to be one of the leaders in hazardous waste disposal business, operating in four business segments: Technical Services, Field Services, Industrial Services and Oil & Gas Field Services. The majority of the company’s adjusted EBITDA, $245 million, was generated from the Technical Services segment. The Industrial Services segment ranked second with $139.9 million in adjusted EBITDA in 2012, while the Oil & Gas Field Services and Field Services segments contributed only $75.8 million and $25 million, respectively, in adjusted EBITDA.

At the end of 2012, Clean Harbors Inc (NYSE:CLH) acquired Safety-Kleen, the biggest re-refiner and recycler of used oil in North America, for around $1.3 billion. The company felt excited about this acquisition, as it would strengthen Clean Harbors Inc (NYSE:CLH) in the small quantity waste generator market, support its waste treatment capabilities, tap on the increasing demand for recycled products, especially re-refined oil. The acquisition also enables Clean Harbors Inc (NYSE:CLH) to expand its Environmental Services business in North America. With more than 200,000 customer locations of Safety-Kleen, the cross-selling opportunities could be substantial. Clean Harbors has recently raised its cost synergies estimate to around $70 to $75 million for 2013. The full year adjusted EBITDA was expected to stay in the range of $605 – $620 million.

Because of the Safety-Klein acquisition, Clean Harbors increased its debt level substantially. As of March 2013, it had $1.42 billion in equity, $233 million in cash and short-term investments and $1.4 billion in long-term debt. The acquisition also boosted the goodwill and intangible asset level, at nearly $1.14 billion. At $54.80 per share, Clean Harbors is valued at $3.3 billion. Thus, the market values the company at around 7.2 times its forward EBITDA.

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