In an effort to streamline its business operations,
) has agreed to sell its Vehicle Care division to Atlanta,
) for roughly $120 million in cash. The divestiture is expected
to close by year end.
The Vehicle Care division is an operating unit under Ecolab's
U.S. Sanitizing and Cleaning Segment (43% of total revenues). In
2011, revenues from Ecolab's Vehicle Care division came in at $66
million, accounting for 2% of the US Sanitizing and Cleaning
Segment revenues while adjusted EBITDA was $13 million.
Ecolab asserts that as a concern which is a leading provider of
cleaning and maintenance solutions to industrial, commercial,
institutional and consumer end-markets, Zep is a well aligned
buyer for its Vehicle Care division. While acquisitions remain
Ecolab's aggressive strategy to accelerate growth over the long
haul, the Vehicle Care divestiture also appears to be a strategic
fit in its effort to sharpen its focus on core operations.
Earlier this month, Ecolab agreed to acquire privately-owned
Champion Technologies and its related company Corsicana
Technologies for $2.2 billion, in cash and stock. This will be
Ecolab's biggest acquisition since the company acquired Nalco in
2011 in a cash and stock deal worth roughly $8 billion.
The acquisition of Champion Technologies will strengthen its
foothold in the energy market. 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 business.
As the company gains competitive advantage and makes headway in
the energy market, the divestment of its under-performing Vehicle
Care division will enable the company to direct resources and
focus on high growth avenues.
Since deleveraging remains a looming concern for Ecolab with a
long-term debt of $4,879.2 million and a $1.7 billion cash
payment for its latest acquisition, the sale of its Vehicle Care
division will garner additional funds for the company. Ecolab
exited the second quarter with cash and cash equivalents of
$304.9 million, up 86.8% from the previous-year quarter.
The company's strategy of acquisition and divestment should yield
positive results in the years ahead. The news regarding Ecolab
continues to display its strength in pursuing its strategic
initiatives as reflected in the bullish momentum of its stock
price. Shares of Ecolab reached a new 52-week high of $70.75 on
October 17, 2012.
We currently have a long-term 'Neutral' recommendation on
ECOLAB INC (ECL): Free Stock Analysis Report
ZEP INC (ZEP): Free Stock Analysis Report
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