You are here: COMPAMED Portal. Magazine & More. Magazine. Company News.
Ecolab and Nalco to Merge
Ecolab Deutschland GmbH
Ecolab Inc. and Nalco Holding Company announced the board of directors of both companies have unanimously approved a definitive agreement under which Nalco will merge with a subsidiary of Ecolab in a transaction valued at approximately $8 billion, including assumed Nalco net debt.
Based in Naperville, Illinois, with operations in more than 150 countries, Nalco is the world's leading water treatment and process improvement company, offering water management sustainability services focused on industrial, energy and institutional market segments. Nalco delivers significant environmental, social and economic performance benefits to customers through value-added services in water treatment and management, pollution reduction programs, energy conservation, and oil and gas extraction efficiency and sustainability offerings. Nalco sales were $4 billion in 2010.
Under the terms of the transaction, Nalco shareholders will have the option to receive either 0.7005 shares of Ecolab common stock or $38.80 per Nalco share in cash, without interest, subject to proration such that the overall consideration paid to Nalco shareholders will be approximately 70 percent in Ecolab shares and 30% in cash. The stock component of the consideration will represent a tax-free exchange. In aggregate, Ecolab will issue approximately 68.9 million shares of Ecolab stock and pay approximately $1.6 billion in cash to Nalco shareholders. This represents a fully-diluted offer value for Nalco's equity of $5.4 billion and, inclusive of $2.7 billion in Nalco net debt, a total transaction value of $8.1 billion.
The transaction is expected to close in the fourth quarter, subject to customary closing conditions, regulatory clearance, as well as approval of both Ecolab and Nalco shareholders.
Ecolab also announced that it expects adjusted earnings per share for the quarter ended June 30, 2011 to be $0.64, at the top end of its forecasted range for the quarter. In addition, Ecolab has raised its full year 2011 adjusted earnings per share forecast, before consideration of the transaction, to $2.52 to $2.56 from $2.49 to $2.53. As previously announced, Ecolab expects to report second quarter 2011 results on July 27, 2011.
Douglas M. Baker, Jr., Ecolab's Chairman, President and Chief Executive Officer commented on the announcement, saying, "This merger is a strong and vital step in broadening our business platform and enhancing our global growth opportunities. The key to Ecolab's long record of consistent and above-average growth has been our ability to continually expand the markets we serve, meet the needs of the customers within these markets, and execute. 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. 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's water and oil and gas services end markets in particular represent excellent long term growth potential as the world deals with the quality, cost and availability of those key natural resources. Further, its geographic exposure to high-growth emerging markets offers terrific future potential for the combined companies."
Erik Fyrwald, Nalco's Chairman, President and Chief Executive Officer said, "This is a compelling strategic transaction that delivers an immediate premium to our shareholders and the opportunity to participate in the significant upside potential of the combined organization. We have long admired Ecolab, and we share similar cultures and business models. We look forward to working together to realize the benefits for all of our stakeholders, including our shareholders, customers and employees."
Baker also said, "This merger is driven by the outstanding top-line opportunities that we believe our combined companies can more effectively achieve as one. We believe we can help accelerate Nalco's investments in its product innovation and sales and service force, enhancing the range of effective and efficient solutions for both of our customers and bolstering growth prospects for both our firms. We expect that together we will have stronger, more consistent long-term growth opportunities, and together we will have the people, business and financial resources to capture that growth. We are excited by the potential our combined operations offer and the improved solutions we will bring to our customers, as well as additional opportunities for both companies' associates, and we presently expect 2012 adjusted earnings per share for the combined companies to be approximately $3 per share.
Baker concluded by saying, "Through this combination, we will continue to invest in and expand our products and services to our existing customers while adding new opportunities for better customer service. We look forward to completing the transaction and joining our two great companies together in developing new and improved solutions for critical customer needs, and in turn deliver even better shareholder returns."
Market Leaders Serving Mega-Trends: Making the world cleaner, safer, healthier and more sustainable leverages mega trends including water scarcity, food safety, increasing energy demand, a larger and older population, and increasing human health challenges.
Nalco is well-positioned to benefit from water, energy and emerging market trends, all providing strong long-term potential.
Proven model of great technology and superior field service.
Talented new management team that has re-focused the company on growth.
Ecolab is well-positioned in food safety and healthcare, benefiting from an increasing global focus on cleaning and sanitizing.
Leading technologies and the largest and best-trained sales and service force.
Proven and seasoned management team that has consistently delivered.
Strengthened Combined Foundation: Global leadership positions in major end markets provides improved business balance.
Strengthened Emerging Markets Exposure: The combined company will have approximately $1.5 billion revenue position in high growth emerging markets.
Leading Customers: Both companies serve the leaders in their end markets and have longstanding customer relationships built on premium products and service.
Compatible and Complementary: Great fit in corporate cultures, technologies, competencies and business models.
Nalco offers strong compatibility and a natural complement to Ecolab Business model and value proposition fit with Ecolab's
Growth and service mindset consistent across both companies.
Water treatment is a core need for Ecolab's customers, and presents an essential Circle the Customer opportunity.
Leadership continuity: Nalco operating management team will join Ecolab.
Attractive Synergies: Expect approximately $150 million in combined cost synergies
Solid financial performance with potential for improved growth
Accretive to EPS in current year and beyond
Increased financial strength
Strong post-merger balance sheet with expected strong investment grade rating due to the limited cash component in the transaction
Strong cash flow allows for both business investment in critical growth drivers and for debt reduction
Bank of America Merrill Lynch acted as exclusive financial advisor to Ecolab in connection with the transaction and Baker & McKenzie acted as legal counsel.
With sales of $6 billion and more than 26,000 associates, Ecolab Inc. (NYSE: ECL) is the global leader in cleaning, sanitizing, food safety and infection prevention products and services. Ecolab delivers comprehensive programs and services to foodservice, food and beverage processing, healthcare, and hospitality markets in more than 160 countries. More news and information is available at www.ecolab.com.