Cleaning and pest-control services company Ecolab, Inc., has agreed to pay about $5.4 billion to acquire Nalco Holding Company, a Naperville, Illinois-based water-treatment provider.
It's a move that's expected to help St. Paul-based Ecolab focus on increasing its presence in the water-management market.
The purchase price values Nalco stock at $38.80 per share, which represents a 34.4 percent premium to Tuesday's closing price of $28.87. The deal is valued at $8.1 billion, which includes $2.7 billion in Nalco net debt that will be assumed by Ecolab.
Under the terms of the transaction, Nalco shareholders will have the option to receive 0.7005 shares of Ecolab common stock or $38.80 in cash for each Nalco share that they own.
Ecolab Chairman, President, and CEO Douglas M. Baker, Jr., said that the deal will provide significant growth opportunities for the company.
"Through our participation in the water sector and our strategic planning work, we identified water management as a key future growth segment for us given its growth characteristics and importance to our customers," he said in a statement. "Nalco is the global leader with deep expertise in programs and services to enhance water process efficiency, extend asset life, and improve their customers' end products."
Nalco, which has operations in more than 150 countries, reported sales of $4 billion in 2010. The company offers services to the industrial, energy, and institutional market segments. Those services include water treatment and management, pollution reduction, energy conservation, and oil and gas extraction efficiency and sustainability.
Ecolab reported about $6.1 billion in 2010 sales. It offers cleaning, sanitizing, food safety, pest control, and infection prevention products and services to foodservice, food and beverage processing, health care, and hospitality markets in more than 160 countries.
Ecolab said that the acquisition will save it about $150 million through cost synergies. The company now expects adjusted earnings for the quarter that ended in June to be 64 cents per share, at the top of its forecasted range.
Ecolab's full-year 2011 adjusted earnings per share, before consideration of the transaction, are now expected to be between $2.52 and $2.56-up from the previously announced range of $2.49 to $2.53. The company's second-quarter results will be reported on July 27.
Baker said that he expects the combined companies' 2012 adjusted earnings per share to total about $3.
The deal has been approved by the boards of both Ecolab and Nalco, but it still requires shareholder approval and is subject to regulatory clearance and customary closing conditions. It's expected to close in the fourth quarter.