Browning-Ferris to Sell Stake in American Ecology : Divestiture: Texas company to dispose of its hazardous waste assets, including a big interest in the Agoura Hills company.

American Ecology Corp., an Agoura Hills waste-disposal services concern, could have a new controlling stockholder now that Browning-Ferris Industries Inc. plans to sell its American Ecology securities.

Browning-Ferris, a major waste-disposal company based in Houston that holds options and other securities that would give it 52% of American Ecology’s common stock, plans to sell that stake along with its other hazardous-waste disposal assets.

Browning-Ferris acquired its interest in American Ecology less than a year ago, providing American Ecology with a much-needed cash infusion of $28.5 million. But Browning-Ferris announced plans April 5 to sell its hazardous-waste assets and, in a filing last week with the Securities and Exchange Commission, said the sale would include its American Ecology stake.

The question is whether Browning-Ferris, which hired the investment firm Smith Barney, Harris Upham & Co. to find buyers for the assets, will end up selling its American Ecology securities in one package--giving American Ecology one new controlling stockholder--or in pieces.

What is clear is that American Ecology itself “wouldn’t have the financing” to buy back its securities from Browning-Ferris, said Karl J. Eimer, American Ecology’s chief financial officer.

American Ecology spokeswoman Nicki Hobson said “we honestly don’t know” if Browning-Ferris’ stake will be sold piecemeal, but said, “I suspect it would be better for us” if one party bought the whole package.

“The company still needs a major partner to help carry the capital load of the development projects,” she said, referring to American Ecology’s development of two new low-level radioactive-waste disposal sites at a cost of up to $100 million. One is being built in the desert near the California-Nevada border, and the other in Nebraska.

“These sites are going to be profitable in the long run, but in the short term it does stretch us,” she said. However, she added that “for the time being there is adequate capital to continue work on the projects.”

American Ecology already operates low-level radioactive waste dumps and chemical waste sites. Lawsuits against the company arising from leaks at some of those sites led American Ecology in 1988 to set up a $23.5-million fund for settling the litigation, which led to a $25.3-million net loss that year and a resulting cash crunch at the company.

But American Ecology’s financial health has improved somewhat since Browning-Ferris made its investment. American Ecology had a $1.1-million profit in last year’s fourth quarter, which helped cut its loss for the full year to $3.2 million on revenue of $46.3 million.

Browning-Ferris invested in American Ecology as a way to effectively acquire new hazardous-waste sites without having to go through the sometimes arduous process of developing new sites itself.

But Browning-Ferris, citing low profit margins in its hazardous-waste disposal division, decided to abandon the business, which contributed less than 5% to its total revenue. The company also had struggled to meet environmental regulations governing hazardous-waste sites in several states.

Browning-Ferris’ investment in American Ecology consisted of paying $3 million to buy 200,000 shares of preferred stock that are convertible into American Ecology common shares; $3 million to buy an option that allows Browning-Ferris to buy an additional 1.5 million common shares for $15 each; and $22.5 million in bonds that are convertible into an additional 1.5 million shares of common stock.

Had Browning-Ferris exercised its option and converted its other securities, it would have acquired more than 3 million newly issued American Ecology shares, giving it 52% of the company. To date, Browning-Ferris had not taken those steps and owns no common stock in American Ecology, Eimer said.