Under terms of the Purchase Agreement, Vertex Energy will pay the following consideration in exchange for 100% of the equity interest in the Acquired Company: (i) $14.8 million in cash and assumed debt; (ii) 4,545,455 million restricted shares of the Company’s common stock; and (iii) $1.7 million cash consideration for real-estate acquired in the transaction from B&S LP. Additionally, for each of the three one-year periods following the closing date of the transaction, Holdings will be eligible to receive earn-out payments of $2.23 million, up to $6.7 million in the aggregate, contingent on the combined company achieving EBITDA targets of $10.75 million, $12.0 million and $13.5 million, respectively, in those periods. The final purchase price is subject to a working capital adjustment, and $1.0 million of the purchase price will be held in escrow for 18 months to satisfy indemnity claims.As a condition to closing, the Company is finalizing debt financing to fund the acquisition. Further, the Purchase Agreement contains customary representations, warranties, covenants, indemnity provisions and other closing conditions for transactions of similar nature and size. The Company anticipates that it will close the transaction in September 2012. For the fiscal year ended December 31, 2011, the Business generated revenue and EBITDA of approximately $31 million and $6 million, respectively. For the six-months ended June 30, 2012, the Business generated revenue and EBITDA of approximately $19 million and $3 million, respectively. Holdings and B&S LP are related parties controlled by Benjamin P. Cowart, Chairman and Chief Executive Officer of Vertex Energy. Mr. Cowart directly or indirectly owns a 77% interest in Holdings and a 100% interest in B&S LP. Additionally, Chris Carlson, the Company’s Chief Financial Officer, owns a 10% interest in Holdings. The Company has numerous relationships and transactions with Holdings and its subsidiaries, including the lease of a storage facility, subletting of office space, operating agreement for the TCEP facility, transportation of feedstock to re-refiners and the Company’s storage facility, and delivery from the Company’s re-refinery to end customers.
All negotiations on behalf of the Company were conducted by the Company’s Related Party Transaction Committee, a sub-committee of the Company’s Board of Directors, which consists of three independent board members.Craig-Hallum Capital Group LLC served as exclusive financial adviser to Vertex Energy, Inc. in connection with the acquisition, and Mayer Brown LLP acted as its legal adviser. Sedgwick LLP acted as legal adviser to Vertex Holdings, L.P. and B & S Cowart Family L.P. Subsidiaries of the Acquired Company
- Cedar Marine Terminals, L.P. Cedar Marine Terminals operates a 19-acre bulk liquid storage facility on the Houston Ship Channel. The terminal serves as a truck-in, barge-out facility and provides throughput terminal operations. Cedar Marine is also the site of the TCEP re-refining process.
- Crossroad Carriers, L.P. Crossroad Carriers is a third-party common carrier that provides transportation and logistical services for liquid petroleum products, as well as other hazardous materials and waste streams.
- Vertex Recovery L.P. Vertex Recovery collects and recycles used oil and residual materials from large regional and national customers throughout the US and Canada. It facilitates its services through a network of independent recyclers and franchise collectors.
- H&H Oil, L.P. H&H Oil operates as a subsidiary of Vertex Recovery. It collects and recycles used oil and residual materials from customers based in Austin, Baytown, and Corpus Christi, Texas.