Was alerted by reader Enrico to the following article on Richard Heckman and the more I read, the more interested I got.
Some quick valuation numbers:
Assets= $456m (after $184m goodwill write-down on China Water assets)
Liab. = $13m
Debt = $0
Cash = $199m
M Cap = $350m
From the company’s website:
Heckmann Corporation (NYSE: HEK) is a holding company that was created to make investments in attractive businesses. The Company completed its first investment, the acquisition of China Water in October 2008, now operating as wholly-owned subsidiary, China Water & Drinks, Inc. On July 1, 2009, the Company completed its second investment, the purchase of a multi-modal water disposal, treatment, and pipeline transportation business in Texas, now operating as wholly-owned subsidiary, Heckmann Water Resources Corporation. The Company also makes strategic minority interest investments, such as its recent investment in Underground Solutions, Inc. (OTC: UGSI).
We have a strong balance sheet and seek additional acquisition opportunities as we build a worldwide enterprise. As of March 31, 2009, we had $300 million dollars in invested cash and cash equivalents. We intend to make additional investments and acquisitions as we find attractive long-term opportunities for our stockholders.
PE.com reported on the China Water deal:
Palm Desert entrepreneur Richard Heckmann is diving back into the water business, with an aim to consolidate the bottled water industry in Asia, much like he did in the United States to the tune of billions in revenue.
The former chief executive of Palm Desert-based US Filter said early Tuesday that his acquisition firm would acquire China Water and Drinks Inc. for about $625 million. Heckmann said China’s rampant groundwater pollution, coupled with its population of 1.3 billion people, provide for an ample market. About 250 companies produce and sell bottled water in China, a hefty number that Heckmann said he hopes to consolidate.
During the conference call, Heckmann said China Water ranks fifth in overall revenue among competitors in Asia, behind Coca-Cola China….
…Heckmann’s blank-check company raised $450 million in an initial public offering in November. At that time, Heckmann was coy about what companies he would be interested in buying.
“We like water, but we like everything,” he said last year.
I really like this. It is another buy for less than book value ($4.02) in a company with no debt and near 50% of the share price is cash on the books. The two businesses they have bought to this point are very good businesses. China Water is a leader in its field there (yes there was a problem with some folks there “skimming” but that has been address and their shares/warrants cancelled, hey, its China) and the Greer Exploration is a very interesting business that oil & gas companies cannot do without (a better explanation of it is in the release that follows).
CEO and Chairman Richard Heckman owns just under 12% of the outstanding shares. Goldman Sachs (GS) recently (last quarter) took a 4.7m share stake in the company.
This is a play a bit like Compass Diversified Holding (CODI). Growth will come from the businesses they buy and sell.
Here is a press release updating the current investments the corp. has made:
hek1
Agreement to buy Greer Exploration:
Heck 2
Here is the China Water Presentation:
hek
Disclosure (“none” means no position):None ….Yet
6 replies on “Heckman Corp….”
From what is outlined in the 10-Q, things appear to be pretty weak, especially the note on the personnel. All throughout the 10-Q is says how the business is weaker than they anticipated. But I wonder what the true degree of this weakness is? I also wonder if Heckmann basically got stiffed on China Water?
Here's a general list of the weaknesses, but I wonder if this is truly the extent of it:
"The business we acquired in China is not currently as strong as we had anticipated. Sales for the first quarter of 2008 were disappointing, reflecting the downturn in the China economy.
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"In addition, the financial reporting systems we inherited, which we knew were deficient at the time of the acquisition, continue to be a challenge.
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"In light of these factors, for the period ending March 31, 2009, we recorded an increase to bad debt expense of $2.0 million, and reduced the purchase price allocation on certain deposits relating to prior management’s acquisition activities, from approximately $16.6 million to approximately $5.8 million.
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"We have cancelled approximately 15.5 million shares issued to former China Water management and insiders, and approximately 1.5 million shares underlying warrants issuable to them.
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"In addition, we have evaluated the goodwill recorded on acquisition, and have reduced it from an initial estimate of approximately $315.0 million, reflecting (1) a reduction of approximately $100.0 million relating to the share cancellations mentioned above, and (2) approximately $184.0 million related to an estimated non-cash impairment charge (which could change in the future)."
You are promoting a piece of crap.
another phony-baloney boiler room type of fraud.
Ben,
agreed, all is accurate but that is why you can buy it at a 70% disc. to the price before the buys.
Heckman is a smart guy that will fix the problems IMO.
J,
Care to give any more insight??
Heckman paid $625m for China Water and then had to write down $184m of that. That's almost 30%. If they overpay by a similar amount for future acquisitions then book value is really overstated and you aren't buying it at a discount but roughly at par.
The key question is whether their future acquisitions will be accretive to book value or not. The evidence so far on China Water is not good, but perhaps Heckman's track record on other deals in his past mitigates against this one data point somewhat.
Is there any source info on how much value he created as an investor in his past?
Jim,
Follow the article link at the beginning of the post..
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Sara
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