) recently completed the sale of its Vehicle Care division to
) for roughly $120 million in cash. The divestment is expected to
be dilutive to Ecolab's earnings per share by 3 cents in
The Vehicle Care division was an operating unit under Ecolab's
U.S. Sanitizing and Cleaning Segment (43% of total revenues). In
2011, revenues from the Vehicle Care division came in at $66
million, accounting for 2% of the U.S. Sanitizing and Cleaning
Segment revenues while adjusted EBITDA was $13 million.
The divestment of its under-performing Vehicle Care division
will enable Ecolab to direct resources and focus on high growth
avenues. Net after-tax proceeds from the divestiture were about
$75 million. Since deleveraging remains a looming concern for
Ecolab with a long-term debt of $5,386.7 million and a $1.7
billion cash payment for its latest acquisition, the net proceeds
will be used for debt repayment and general corporate
The divestment will allow Ecolab to focus on its core business
as the company gains competitive advantage and makes headway in
the energy market with the upcoming acquisition of Champion
Technologies. The proposed acquisition will beef up Ecolab and
help the company benefit from the potential represented by one of
the fastest growing industries in the U.S. Following the closure,
the company is slated to become a giant in the oilfield chemical
Ecolab's aggressive strategy to pursue acquisitions along with
its ability to divest non-core, underperforming assets should
sharpen the company's focus on profitable niches. This should
encourage investor sentiment.
We currently have a long-term 'Neutral' recommendation on
Ecolab which carries a short-term Zacks #3 Rank (Hold).
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