Safety-Kleen dust-up

The old wartime tune ‘You Made Me Love You’ may ring in Safety- Kleen’s ears. Led by founder and CEO Donald Brinckman, the Illinois-based waste recycler announced in August 1997 that it was investigating ‘strategic options’ to enhance shareholder value. In November, trumpeted by a media blitz, Safety-Kleen’s board agreed to a merger with a consortium led by Ontario-based Philip Services Corp.

But Safety-Kleen wasn’t to be swept up so easily. South Carolina-based Laidlaw Environmental Services – which had made an unsolicited takeover bid just two weeks before – doggedly refused to back down. Laidlaw upped its bid, vowing to eliminate up to 800 employees and close Safety-Kleen’s head office at One Brinckman Way.

Brinckman wasn’t thrilled. Still, cloistered behind a poison pill and other anti-takeover provisions, Safety-Kleen seemed to hold all the cards. Management offered Laidlaw a very cold shoulder and called a shareholder meeting February 11 to approve the Philip merger.

Trouble starts

Then things began to fall apart for the Safety-Kleen/Philip team. A court-ordered special shareholder meeting January 9 voted for Laidlaw’s bid to override Safety-Kleen’s troublesome shareholder protection provisions.

Proxy advisory firm ISS recommended voting in favor of Laidlaw’s proposals. ‘We thought Safety-Kleen low-balled the synergies available with Laidlaw Environmental,’ says Mark Brockway, senior analyst at ISS. ‘We felt shareholders should be given the opportunity to decide for themselves among the two offers.’

Then, after rejecting a revised Laidlaw offer, Safety-Kleen moved its meeting date to February 25 and later adjourned it to March 9. A key factor was Philip’s announcement of a significant write-off as a result of an inventory mix-up. Word on the Street was maybe Philip couldn’t pay its portion of the purchase price.

As Safety-Kleen stock rose to only a few cents below Philip’s $27 offer, the arbs picked up the pieces. In the end, they would represent over 50 percent of voting stock. With some 30 mn shares traded after the January 5 record date, the challenge was finding the record holders and getting them to vote the proxy. Chase Mellon Shareholder Services did the task for Safety-Kleen while Morrow & Co worked for Laidlaw.

‘The process turned out longer than anticipated,’ says Maureen Fisk, IR director at Safety-Kleen. ‘As the arb community moved in, some shareholders changed their vote so often even they lost track of where they stood.’

Meanwhile, in a bizarre turn of events, Safety-Kleen’s own investment banker, William Blair, offered a controversial opinion favoring Laidlaw’s offer. That put an effective IR weapon in Laidlaw’s hands and it exploited the opportunity with full-page newspaper ads. Safety-Kleen’s board was flabbergasted.

Fisk offers some advice for IR officers facing similar circumstances. ‘Retain the best of the best in terms of advisors,’ she cautions. ‘This is no time for amateur hour. Trust no-one. The IR officer becomes a critical component in the process. Make sure senior management hears you.’

All along, the tender offer remained on the table and a lot of shares were being picked up. Laidlaw asked the courts to waive Safety-Kleen’s poison pill and allow shareholders to consider its bid.

When the meeting day finally arrived, Philip’s bid for Safety-Kleen was foiled when they failed to gain the needed two-thirds voting support for the deal. Safety-Kleen directors huddled late into the evening planning their next move. They were running out of options.

After a final desperate attempt to find a white knight, Safety-Kleen’s board agreed to lay down its takeover barriers including the poison pill. Laidlaw’s triumph was virtually assured. The challenge now is to peacefully integrate the former rivals.

As for Fisk, she knew at the start this would likely be the end of an IR opportunity at Safety-Kleen. ‘You might say I’m evaluating my strategic options,’ she quips.

Upcoming events

Explore

Andy White, Freelance WordPress Developer London