Following a substantial delay in acquiring Champion
Technologies, Ecolab Inc. ( ECL ) announced that it
has finally reached a consent agreement with the U.S. Department of
Justice (DOJ) regarding the deal. In the earlier press release, the
company proposed the closing time as Apr 15, 2013.BALCHEM CP CL-B (BCPC): Free Stock Analysis
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Initially, the transaction was expected to close by the end of
2012 but due to certain antitrust-related issues with the U.S.
Department of Justice ("DOJ"), the company had extended its
agreement till Feb 28, though it was further delayed to end
The news boosted investor confidence on this global cleaning and
sanitation products maker, as reflected by the stock reaching a new
52 week high of $80.83 on Tuesday, Apr 9.
According to the DOJ, Ecolab needs to sell Champion chemical
management services used in deepwater wells in the U.S. Gulf of
Mexico to a third party. The DOJ has incorporated these steps in
the agreement to ensure healthy competition in these critical
services. Nalco, now a part of Ecolab, and Champion, are the
leading suppliers of this service and the Antitrust Division fear
that the merger will lead to a monopoly, which might adversely
affect service quality and efficiency as well push up prices.
Ecolab accepted these terms as it claims that only 3% of
Champion's business will be affected by the sell-off. It also
maintains that its initial goal of becoming a giant in the oilfield
chemical business will remain intact. The Champion's deal would be
the company's largest acquisition since the Nalco buyout. The
proposed acquisition will beef up Ecolab's Global Energy Services
franchise and expand its footprint in the North American energy
The total value of the Champion's deal now stands at $2.3 billion,
inclusive of assumed debt. Although the deal will no longer be
accretive to 2013 earnings by 12 cents as predicted earlier, Ecolab
now expects adjusted earnings per share to increase by 7 cents in
2013. The accretion is expected to increase significantly to 50
cents per share by 2016.
Ecolab currently has a Zacks Rank #3 (Hold). Other
chemical-specialty companies such as Balchem Corp.
( BCPC ),
Minerals Technologies ( MTX ) and
Prospect Global Resources ( PGRX ) warrant a look.
While Balchem is a Zacks Rank #1 (Strong Buy) stock, the other two
carry a Zacks Rank #2 (Buy).