Calgon Carbon said today it will not convert its activated carbon business to a master limited partnership, a move one of the Robinson environmental products and services company’s largest shareholders has been pressing it to make.
The company also said its board has authorized the additional repurchase of up to $100 million of its shares.
Calgon asked Morgan Stanley earlier this year to study whether converting the unit to limited partnership made sense. After the investment banker rejected the idea, Starboard Investors, a New York investment fund that owns 9.7 percent of Calgon’s stock, urged the company to reconsider.
So Calgon hired Evercore Group, another investment banking advisory firm, to look at the idea again. Evercore reached the same conclusion as Morgan Stanley.
In a letter sent to shareholders today, Calgon president and CEO Randy Dearth said the board rejected the idea because the partnership concept “is not accretive to shareholder value due to rules on qualifying income, the structural support needed, and the additional costs of creating and operating an MLP.”
Master limited partnerships are publicly traded entities that pass on earnings directly to their shareholders, who pay taxes on income they receive. The partnership avoids the taxes a company pays before distributing remaining earnings to shareholders in the form of dividends.
The partnerships, which are frequently used in energy and real estate businesses, must generate most of their income from real estate, natural resources and commodities.
The $100 million repurchase plan increases the amount of shares the company is authorized to buy back to up to $200 million. Mr. Dearth said the increase “will not impede our ability to fund other strategic investments.”
He also disclosed the company has also sign contracts with two coal producers that provide stable, competitive pricing for the commodity through 2018. The coal is baked to make activated carbon, which is used to remove impurities from air, water and industrial processes.
The announcement was made before Wall Street opened. Calgon shares closed Thursday at $19.38, off 8 cents. They are up 37 percent this year.
Len Boselovic: email@example.com or 412-263-1941.