Global cleaning and sanitation products maker,
), postponed the closure of the Champion Technologies deal. The
company has extended its agreement with the U.S. Department of
Justice ("DOJ") till February 28, 2013, to resolve certain
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The deal was expected to close by the end of 2012. Management at
Ecolab, in an early December 2012 press release, had indicated
that the transaction might not be completed within the stipulated
time frame, or at all. Now, the company is confident that it is
capable of solving the remaining issues raised by the DOJ.
The news was somewhat expected, and thus came in as no surprise.
This was reflected by the relatively unchanged share price on
Friday, Dec 21, 2012. Given Ecolab's vast experience in
successfully acquiring large entities, we believe that the
company will be able to overcome these acquisition related
In October 2012, in an effort to expand its Global Energy
Services franchise, Ecolab agreed to acquire privately-owned
Champion Technologies and its related company Corsicana
Technologies. Earlier the deal was for $2.2 billion, to be paid
in cash and stock.
Recently in December 2012, the company altered the agreement.
Ecolab will not take over Champion's downstream process and water
solutions business as it will be spun-off to Permian's
stockholders before the buyout. Consequently, the value of
the transaction has been revised to $2.16 billion.
The decision to acquire Champion, within a year of the Nalco
acquisition (for roughly $8.3 billion) in December 2011,
strengthens the company's energy business in North America.
Following the closure, the company is slated to become a giant in
the oilfield chemical business.
The acquisition of Champions is expected be accretive to Ecolab's
adjusted earnings per share for 2013 by 12 cents. The accretion
is further expected to increase significantly to 50 cents per
share by 2016.
St. Paul, Minnesota-based Ecolab serves the food service, food
and beverage processing, healthcare, energy, water treatment and
hospitality markets in the U.S. as well as internationally.
Although we are impressed by Ecolab's strong international
exposure, we remain cautious about currency fluctuations and
aggressive competition from the likes of
The Clorox Company
Church & Dwight Co. Inc.
We currently have a 'Neutral' recommendation on Ecolab. The stock
carries a short-term Zacks #3 Rank (Hold rating).