This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Greenberg: Activist Stake May Make Clean Harbors Less Hazardous

By: Herb Greenberg | 04/25/14 - 09:30 AM EDT

Stocks in this article: CLH

(A version of this piece originally ran Thursday night on Herb Greenberg's Reality Check.)

SAN DIEGO (TheStreet) -- With Relational Investors taking a 9.08% stake in Clean Harbors (CLH), it would be absurd to keep it on the Watch List, where it has been red-flagged. (Activism and takeovers are always one way to make the red flags irrelevant.)

Clean Harbors would appear to be the perfect activist stock. One mistake after another, or, as I wrote in my original piece when I red-flagged Clean Harbors last November, it's a comedy of errors.

The company itself recognizes the problems. From its last earnings call, CEO Alan McKim:

...We're launching a broad strategic review of our operating structure, with a focus on how to better drive organic growth and improve our return on invested capital. We also have initiated a cost reduction program and are taking $75 million in additional costs out of the business and bringing our cost structure more in line with our current revenue profile. We are targeting areas ranging from our non-billable headcount, office consolidation, maintenance and logistics, with the goal of significantly reducing our overall expenses.

In its filing, Relation said:

During its fourth quarter earnings call on February 26, 2014, the Company announced a broad strategic review of its operating structure with a focus on driving organic growth and improving its return on invested capital. The Reporting Persons support such actions which may include divestitures or a tax free spin-off of assets that do not earn their cost of capital, do not directly feed waste streams to the Company's high return disposal assets or lie outside of the Company's core competency in waste disposal.

In other words, a dismantling of the deals McKim has put together.

The filing added:

The Reporting Persons believe the Company will have substantially completed the investments necessary for its strategic positioning by 2015. Therefore, a larger portion of excess cash flows in future periods will be available for distribution to shareholders through dividends and share repurchases. highest and best return alternatives. Based on the Company's current valuation, the Reporting Persons believe share repurchases represent a low-risk, high-return hurdle against which all alternative uses of capital, particularly acquisitions, must be benchmarked.

Reality: Clean Harbors has been begging for somebody to come in and attempt to make sure something happens. In retrospect, its initiation of a strategic review was like putting the request up in neon lights.

But the stock already trades at a lofty multiple relative to what many believe it's worth as a hybrid between a refiner and a hazardous waste company.

It's unclear exactly what Clean Harbors will sell, but lodging and re-refining would be a start.

The bigger question is whether the core hazardous waste business could then be sold to a corporate or private-equity buyer, assuming they would be willing to assume the liabilities that come with hazardous waste cleanup. (Unlikely.) Or (more likely, as the filing suggests) the remaining company would create some kind of low-to-no growth income-generating pure hazardous cleanup play -- in other words, a version of what Clean Harbors used to be.

This much is clear. This has been McKim's baby. As well-liked as he is (and he is well liked) his board is perceived to be weak and it could be argued it's time for somebody else to call, or at least get behind, the shots.

-- Written by Herb Greenberg in San Diego.

Follow @herbgreenberg





Herb Greenberg, editor of Herb Greenberg's Reality Check, is a contributor to CNBC. He does not own shares, short or trade shares in an individual corporate security. He can be reached at herbonthestreet@thestreet.com.

To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.

Markets

DOW 17,810.06 +91.06 0.51%
S&P 500 2,063.50 +10.75 0.52%
NASDAQ 4,712.97 +11.1030 0.24%

Herb's Tweets

Brokerage Partners

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
Real Money Pro

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Trifecta Stocks

Trifecta Stocks analyzes over 4,000 equities weekly to find the elite 1% of stocks that pass rigorous quantitative, fundamental and technical tests.

Product Features:
  • Model portfolio
  • Trade alerts
  • Recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
Stocks Under $10

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Dividend Stock Advisor

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Breakout Stocks

Bryan Ashenberg, using sophisticated stock screening and fundamental research, identifies potentially explosive small and mid-cap stocks.

Product Features:
  • Model portfolio
  • Small-cap and mid-cap focus
  • Intraday trade alerts
  • Weekly roundups
Options Profits

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
Top Rated Stocks Top Rated Funds Top Rated ETFs