Relational Investors LLC, the activist fund co-founded by Ralph Whitworth and David Batchelder, has acquired 9.08 percent of Clean Harbors Inc. since February and is in talks with management.
Based in Norwell, Massachusetts, Clean Harbors provides hazardous waste disposal and other environmental, energy and industrial services, according to its website. Relational is urging the company to refocus on its core hazardous waste business, buy back stock and pursue asset sales or spinoffs, according to a regulatory filing yesterday.
Clean Harbors announced a “broad strategic review” on Feb. 26 after reporting fourth-quarter earnings that missed expectations, sending the shares down almost 15 percent in one day. Chief Executive Officer Alan McKim, who is also the company’s chairman and founder, announced $75 million in cost cuts and a $150 million buyback authorization that day.
The company rose 8.5 percent in late trading yesterday, after closing at $58.01 in New York. The shares have gained 1.8 percent in the past year.
Jim Buckley, a spokesman for Clean Harbors, didn’t respond to a call seeking comment.
Recent meetings with Clean Harbors’ executives increased Relational’s confidence “that the management team is intently focused on achieving” margin targets announced in September, the fund said in yesterday’s filing disclosing the new investment. Relational said it doesn’t currently seek board representation, but may in the future.
Clean Harbors dominates hazardous waste collection, transport and disposal, its key businesses which “consistently earn a high return on invested capital and benefit from material barriers to entry,” Relational said. That dominance is “severely underappreciated” by investors today.
The fund wants the company to refocus on that core and improve return on invested capital, after a series of acquisitions in recent years, including the $1.25 billion takeover of Safety-Kleen Inc., which expanded into parts cleaning and oil re-refining.
Founded in 1996, Relational buys stakes in companies it considers undervalued and then lobbies management and boards for changes to boost investor returns. In recent years the firm has targeted industrial companies including equipment manufacturer SPX Corp. (SPW), bearings maker Timken Co. and machinery builder Illinois Tool Works Inc.
For the past year, Whitworth has served as interim chairman of Hewlett-Packard Co. (HPQ) after urging changes to turnaround the largest personal-computer maker.
San Diego-based Relational, which manages about $6 billion, also holds stakes in energy group Hess Corp. (HES), agricultural commodity processor Bunge Ltd., snacks supplier Mondelez International Inc., x-ray maker Hologic Inc., and air-conditioning manufacturer Ingersoll-Rand Plc, according to its most recent holdings disclosures.
Activist investors tend to buy at least 5 percent of a company’s stock and flag their intention to actively engage corporate executives and directors by disclosing their holding in a 13D filing with the U.S. Securities and Exchange Commission.
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