Ecolab to Buy Chemicals Co. in Deal Valued at $2.2B
Ecolab, Inc., said Friday that it has agreed to buy Houston-based specialty chemicals company Champion Technologies through a deal that’s valued at $2.2 billion.
St. Paul-based Ecolab—which provides cleaning products, food safety services, pest control, and energy services for commercial and industrial customers—will pay about $1.7 billion in cash and issue roughly 8 million shares of its stock for Champion, a private, family-owned company that offers products and services to the oil and gas industry. Shares of Ecolab stock closed at $63.67 on Thursday, which values the stock part of the deal at about $509.4 million.
“This transaction represents a rare opportunity to build on our position in a fast-growing market by improving our geographic coverage and technology offerings,” Ecolab Chairman and CEO Doug Baker, Jr., said in a statement.
He added: “Champion’s technology and product strengths in the U.S. and Canada are very complementary to our innovative technology and services in the offshore and international energy markets.”
Champion employs roughly 3,300 people in more than 30 countries. Its 2011 revenue totaled $1.2 billion.
The deal is expected to close by the end of this year and is subject to regulatory clearance and other customary closing conditions.
The announcement of the Champion deal comes about 10 months after Ecolab closed on its $8.3 billion purchase of Naperville, Illinois-based Nalco Holding Company, a water-treatment provider.
Baker called the Champion deal “terrific financially” and said that like the Nalco acquisition, Champion offers “very attractive growth” and “an annuity-like revenue model generating steady and predictable earnings patterns . . .”
The deal will result in $150 million in cost synergies by the end of 2015, according to Baker. Ecolab said that it will be accretive to cash and earnings in 2013, the first full year of the companies’ merged operations.
News of the planned deal sent Ecolab shares up 4 percent to close at $66.24 on Friday—and the company’s stock closed at $67.87 on Monday.
Jeff Windau, an analyst with Edward Jones in St. Louis, told the Pioneer Press that energy services will account for about a quarter of Ecolab’s business following the acquisition.
However, he also said that the deal could lead to more fluctuations in Ecolab’s earnings. While the company’s cleaning technologies for commercial and industrial firms have produced relatively steady earnings for investors, oil and energy markets are much more volatile.
According to the St. Paul newspaper, the acquisition will make Ecolab a key producer of oil field chemicals and give it a strong position serving fast-growing shale oil production areas in Canada and the United States. (Click here to read the Pioneer Press’ full report, which includes an interview with Baker.)
Ecolab, which will report its third-quarter financial results on October 30, said Friday that it expects adjusted earnings of 87 cents per share, at the high end of its previously announced expected range of 83 cents to 87 cents per share and 16 percent higher than what the company reported during last year’s third quarter.
Ecolab is among Minnesota’s 15-largest public companies based on revenue, which totaled $6.8 billion in 2011.