Fed-Up Metalclad Will Sell Mexican Operations

Upset at its treatment in Mexico and disgruntled with the lack of progress on its 30-month-old claim for reparations over the seizure of one of its businesses there, Metalclad Corp. said Wednesday that it will sell its Mexican operations and stick to business in the United States.

The Newport Beach industrial insulation and asbestos treatment company has an industrial waste collection and recycling business in Mexico with 200 employees. It said it hopes to sell the business this year and will continue operating it in the meantime.

Metalclad also said it lost $4.7 million, or 16 cents a share, last year, compared with a loss of $4.5 million, or 16 cents a share, in 1997. Revenue increased 12% to $10 million from $8.9 million. The company said $2.3 million of its 1998 loss, or almost half, came from its Mexican operations, the same as in 1997.

Metalclad entered Mexico with high hopes more than five years ago, spotting potential in the country’s growing need to clean up its environment.

In addition to the waste recycling business, Metalclad obtained permission to build a state-of-the-art hazardous waste disposal site in the state of San Luis Potosi. The $22-million facility was seized by the state government just as it was scheduled to open in 1995.

Unable to settle the matter in negotiations with the government of the state, Metalclad became the first U.S. company to file an arbitration claim against the Mexican government under terms of the North American Free Trade Agreement.

Grant Kesler, Metalclad’s president, says he expects the matter to be decided late this year.

Early last year, Kesler said in an interview that he was not going to let “one negative deal” stand in the way of his company’s otherwise good business experience in Mexico.

But in September, as the company was nearing completion of a $10-million hazardous waste site in the state of Aguascaliente, the regional government withdrew permission for the disposal facility, Kesler said Wednesday.

“That was the last straw,” he said. “We have lost $45 million on our Mexican operations over the years and now our shareholders have spoken, loud and clear. We are getting out.”

Metalclad’s shareholders, he said, have “lost all confidence in Mexico’s ability to protect foreign investment” in the waste treatment industry.

As part of the decision to end its Mexican business ties, the company said, three Mexican business executives on its board of directors have resigned. Replacing them are Bruce H. Haglund, 47, the company’s general counsel and a principal in the Orange County law firm of Gibson, Haglund & Johnson; Raymond J. Pacini, 43, president and chief executive of California Coastal Communities Inc. in Newport Beach--formerly Koll Real Estate Group--and J. Thomas Talbot, 63, owner of Talbot Co., a Newport Beach investment and asset management company.

Metalclad stock, traded in the over-the-counter market, closed Wednesday at 22 cents a share, down 6 cents.