by Maureen Flanagan
American Capital (Nasdaq:ACAS) today announced that it has taken ROY F. WESTON, INC. (Nasdaq:WSTNA) private through a $66 million employee buyout transaction that will result in employees receiving approximately 40% of the equity in the company over the six years following the closing.
WESTON, the fifth-largest all-environmental consulting and engineering firm in the United States, has for 44 years pioneered the solutions that bring damaged environmental resources back to life. A top-tier environment and infrastructure services company, WESTON responds to challenges posed by hazardous and nuclear waste, solid and liquid waste, water and air pollution, and compliance with environmental standards. The company offers sophisticated professional skills and a broad range of scientific, technological and management expertise to meet these challenges. As heightened public concern has broadened awareness of environmental issues and led to extensive government regulation, WESTON's services have been in demand by federal, state and local government agencies as well as Fortune 500 companies.
In 1997, a new senior management team took over and implemented a turnaround that increased WESTON's profitability and created new opportunities for growth. Struggling as a micro-cap public company with a limited following on Wall Street, the board of WESTON last year elected to pursue strategic alternatives. American Capital responded to the opportunity, teamed with that management team, and structured a deal that aligned the incentives of the investors, management and the 1,650 employees that give WESTON its true competitive advantage. The result of that collaboration was the $66 million buyout consummated today.
"This going private transaction will strongly align the interests of employees and stakeholders to provide a base for WESTON's future success," said WESTON's CEO, William L. Robertson. "By providing incentives for success, every employee, manager and stakeholder will be engaged in the company's performance and the future of WESTON. American Capital is an ideal partner for WESTON, with the potential to provide access to capital to accelerate our plans for growth."
American Capital Principal David Ehrenfest Steinglass added, "In this management team, we have found a group of leaders extremely excited by the prospect of partnering with all of the employees through a broad-based ownership structure. We have great hopes for what that structure and this management team will do to drive this business to new heights."
WESTON focuses on infrastructure redevelopment - undoing the adverse environmental consequences of past development activities and restoring properties to productive use. WESTON accomplishes this through 1) remediation, which entails the cleaning up and restoration of contaminated sites, 2) redevelopment of impaired properties, ports and waterways, and 3) the design, construction and operation of water and wastewater systems. The services provided include the development of cost-effective technologies and solutions to environmental problems, assistance in obtaining governmental permits, preparation of specifications and designs for constructing remedial systems and facilities, and the construction, startup and operation of these facilities.
The company also provides support for a wide range of environmental infrastructure operations in support of federal agencies including the Department of Defense (DOD), Department of Energy (DOE), Environmental Protection Agency (EPA) and Army Corps of Engineers (COE).
WESTON uses innovative methods and unique approaches to solve environmental challenges. It develops and patents its own technologies and also acquires the use of other technologies through licensing and partnering arrangements. The company uses its innovative problem-solving skills to respond to client-specific needs, from designing rooftop gardens to cut energy costs in Chicago, to using sunflower and mustard plants to remove lead contamination from soil. Based in West Chester, PA, WESTON has 60 offices throughout the United States and provides its integrated environmental engineering solutions to industry and government worldwide.
"WESTON is an excellent addition to American Capital's portfolio," said Ira J. Wagner, ACAS Executive Vice President and COO. "Going private made a lot of sense at a time when there has been a depressed public valuation of small- cap companies. The new ownership structure enables WESTON to flourish, enhancing its future potential and market opportunities."
To accomplish the buyout, American Capital invested $30 million ($27 million in subordinated debt financing in addition to a $3 million investment in preferred and common stock.) Bank of America led a $49 million senior credit facility. WESTON's management invested $1.5 million. Following the merger, WESTON will be wholly owned by WESTON ACAS Holdings, a portfolio company controlled by American Capital and partially owned by senior WESTON managers, led by CEO Robertson, and the rest of the WESTON employees through an employee stock bonus plan.
The board of WESTON will consist of Robertson, Ehrenfest Steinglass, Patrick G. McCann (WESTON's President and COO), Adam Blumenthal (American Capital Vice Chairman), Thomas Harvey (CEO, Clean Fuels), Philip Harper (CEO, US Investigations Services and American Capital director), and John Worthington (CEO, TransCore Holdings, an American Capital portfolio company.)
Since 1996, the environmental services market has been estimated at $15 billion to $20 billion annually with a compound annual growth rate between 3% and 9%. Government agencies continue to be major contractors for environmental services. The DOD, for example, is a prime contractor for remediation services as it cleans up contaminated sites at former and current military bases. DOE is also a key contractor as more nuclear plants are decommissioned and efforts continue to clean up the nuclear weapons complex. WESTON has served these federal government clients for decades.
As a private company with management and employees who own a significant stake in their company, WESTON can now build on the momentum generated during the last five years by the current management team. The company has what it takes - strong relationships with government and commercial clients, expertise in a broad range of environmental consulting and engineering activities, and strategies for growth - to continue to lead its industry in harnessing society's resources for return to productive use.
