HEK should spin off their pipelines/disposal wells into a MLP and IPO it on the market. Similar MLP's exist and trade between 16x-18x ebitda (midstream MLP's). With the proceeds, the company can reduce debt drastically, and the company would also benefit from a higher multiple. Can probably produce $1-2 per share
Assuming Disposal Wells & Pipelines make up ~10% of rev/ebitda, Midstream MLPs trade at 16-18x ebitda and HEK is currently trading at 7.5x consensus. If he spins off the disposal wells & pipelines as an MLP:
8.45x is 13% higher by itself which should justify the action; however, this can also be handled as an IPO and the company can use the proceeds of issuance to repay debt. At 10% of ebitda, the MLP would generate about $20m in EBITDA and be valued at $340m.
$340m in proceeds should be used for
1) Paying down the revolver to lower debt/ebitda and provide additional liquidity
2) For funding working capital/capex
3) For future acquisitions
Assuming the company simply uses half of the proceeds (~$150m) to reduce debt, that would bring the debt down to about $400m. The lower debt load along with the higher multiple on the existing company is very beneficial:
duvdev88...I'm under the assumption you are in Oregon or Washington where really good weed is legal and readily accessible ? I appreciate the idea and number crunching....but really, a big bag of cheetos would do you good. These guys aren't done with acquisitions and I really don't think the pipeline infrastructure is even big enough along with the SW disposal wells to merit being big enough to spin off. Oil pipelines/ natgas pipelines..yes...water pipelines...no. Take one more hit....then start on the cheetos....still admire the thought and effort though. LSP
Its proly too early...but good idea and they probably have it in mind when they get the 'right cards' to play and......get their ducks in a row .....pretty soon but right now its their "ace-in-the-hole" for disposal vs recycle!!