Teppco wants higher bid from Enterprise Products; Clean Harbors stock up on offer for Eveready

By Cristal Cody

Tupelo, Miss., April 29 - Teppco Partners LP on Wednesday rejected a buyout proposal valued at $21.89 a unit by Enterprise Products Partners LP, but Enterprise may make a higher bid, an analyst told Prospect News.

Meanwhile, investors and analysts gave support Wednesday to Norwell, Mass.-based waste and hazardous management services firm Clean Harbors, Inc.'s plans to expand its foothold in Canada with the $387 million acquisition of Eveready Inc.

Also on Wednesday, a market source predicted more consolidation of the Atlas corporate structure after the combination of Atlas America, Inc. and Atlas Energy Resources, LLC.

On Wall Street, the markets broke a two-day losing streak and closed up Wednesday.

The Dow Jones Industrial Average gained 168.78 points, or 2.11%, to close at 8,185.73.

The Standard & Poor's 500 index rose 18.48 points, or 2.16%, to 873.64, and the Nasdaq Composite index added 38.13 points, or 2.28%, to close at 1,711.94.

Teppco wants more

Teppco Partners, a Houston-based oil and gas pipeline and storage company, said Enterprise Products' offer for the outstanding interests undervalues the company.

Enterprise Products, a Houston-based firm that transports natural gas and oil through its pipeline network, offered $1.00 in cash and 1.043 Enterprise common units for each outstanding Teppco unit.

The deal values Teppco units at $21.89 each based on the 10-day average closing prices of Teppco units and Enterprise common units on March 6, the last day of trading before Enterprise made the offer to the company.

Teppco said in a statement that it formed a special committee of independent directors to evaluate the offer and the committee rejected the proposal, but it remains willing to consider a revised proposal.

An analyst told Prospect News on Wednesday that when the offer was made, both companies' unit prices were down considerably.

"They rallied significantly during the last month. Based on where the unit prices were, I would think they might come up higher," the analyst said. "Teppco's rallied really significantly today."

Enterprise Products released the offer publicly a day after Teppco reported first-quarter profit of $78.2 million, or 62 cents per unit, compared with $64.1 million, or 57 cents per unit, in the same period a year ago.

Teppco units rose $1.64, or 6.28%, to close Wednesday at $27.74. Units have traded from $16.90 to $36.88 over the past year.

Units of Enterprise Products fell 53 cents, or 2.14%, to close at $24.24.

Waste services combine

Clean Harbors offered to buy Eveready for $49 million in cash, or $2.64 a share; $118 million in Clean Harbors' stock based on a ratio of 0.1304 of a share of Clean Harbors for each Eveready share; and the assumption of about $220 million of Eveready debt.

Edmonton, Alta.-based Eveready provides industrial and oilfield maintenance and production services to the energy, pulp and paper and industrial sectors.

"From Clean Harbors' perspective, we think it's very good," Al Kaschalk, an analyst with Wedbush Morgan Securities Inc., said in an interview Wednesday with Prospect News.

"They're using just $50 million of cash to close the deal and a little bit of stock and they're helping to get leverage back up on the balance sheet," he said. "In terms of expectations, this is one the company has been working on for some time. It seems they were able to get to the right place and make it happen."

Company executives said on the conference call held Wednesday with analysts and investors that the deal should close in the third quarter.

The transaction must be approved by regulators, lenders and Eveready shareholders.

Kaschalk said that he doesn't "anticipate any potential interference of the closing, regulatory or whatsoever. There will certainly be an evaluation of the competitiveness in the marketplace, but I don't see a big overlap in the services of the two."

Clean Harbors' representatives did not return a message for additional regulatory information.

Alan McKim, Clean Harbors' chairman and chief executive officer, said in a statement that the company's focus for the rest of the year "will be on gaining the necessary approvals, completing the acquisition before the end of the third quarter, and commencing the integration process in the second half of the year."

The deal does include a break-up fee, but the amount was not released on the conference call.

The transaction also includes a provision that Clean Harbors would acquire a smaller portion of Eveready if there were any problems with the financing, James Rutledge, Clean Harbors' chief financial officer, said on the call.

Eveready has 79 operations in Canada, the United States and overseas.

Clean Harbors has more than 47,000 customers in the United States, Canada, Mexico and Puerto Rico.

Eveready shares soared nearly 200% to close at C$10.40, up C$6.93, on Wednesday.

Investors pushed Clean Harbors' stock up $5.24, or 11.33%, to close at $51.48.

More Atlas consolidation?

Atlas America said Monday it plans to buy the remaining 52% of Atlas Energy's outstanding shares that it does not already own in a stock deal valued at about $500 million.

Atlas Energy shareholders will receive 1.16 Atlas America shares for each class B common unit.

An analyst said Wednesday that there could be further consolidation within the corporate family because Atlas Pipeline Partners LP faces "serious concerns" regarding its liquidity position.

Atlas Pipeline "has the most aggressive leverage policy" in its sector and the lowest credit rating, the analyst said.

"Absent any restructuring, Atlas Pipeline could be in financial distress in fiscal year 2009," the analyst said. "We would not rule out the possibility of an exchange offer."

The three Moon Township, Pa.-based natural gas and oil developers share resources and staff.

Atlas Energy shares added $1.78, or 11.61%, to close at $17.11, while Atlas America's stock rose $1.69, or 12.53%, to $15.18 on Wednesday.

Atlas Pipeline shares lost 4 cents, or 0.96%, to close at $4.12, well off the yearly high of $43.97.

Mentioned in this article:

Atlas America, Inc. Nasdaq: ATLS

Atlas Energy Resources, LLC NYSE: ATN

Atlas Pipeline Partners LP NYSE: APL

Clean Harbors, Inc. NYSE: CLH

Enterprise Products Partners LP NYSE: EPD

Eveready Inc. TSX: EIS

Teppco Partners LP NYSE: TPP

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