Ecolab To Buy Water Firm Nalco | July 25, 2011 Issue - Vol. 89 Issue 30 | Chemical & Engineering News
Volume 89 Issue 30 | p. 8 | News of The Week
Issue Date: July 25, 2011

Ecolab To Buy Water Firm Nalco

Specialties: Transaction will create a leader in water treatment and cleaning products
Department: Business
Keywords: acquisition, water treatment, cleaning, sanitizing
Pails are being filled with a dishwashing rinse aid at an Ecolab manufacturing plant.
Credit: Ecolab
Pails being filled at Ecolab manufacturing plant
Pails are being filled with a dishwashing rinse aid at an Ecolab manufacturing plant.
Credit: Ecolab

Institutional cleaning products maker Ecolab has reached a definitive agreement to buy water treatment firm Nalco for $8.1 billion, including the assumption of $2.7 billion in Nalco debt. Pending regulatory and shareholder approvals, the deal should close by the end of this year.

The acquisition will create a global cleaning, sanitizing, and water treatment firm. In 2010, Ecolab had $6.1 billion in sales and 26,500 employees, while Nalco had $4.0 billion in sales and 12,500 employees.

Nalco’s competitors include Ashland, BASF, and General Electric’s Water & Process Technologies unit. The firm is best known as the maker of Corexit 9500, the oil dispersant used to help clean up the Deepwater Horizon oil spill in the Gulf of Mexico last year.

Terms of the transaction call for Nalco shareholders to receive a mix of cash and Ecolab stock equivalent to $38.80 per Nalco share. The payout is a 34% premium to Nalco’s closing price on July 19, the day before the deal was announced.

Commenting on the acquisition, Nalco CEO J. Erik Fyrwald says it combines “Nalco’s leading positions in water and energy services with Ecolab’s strength in food and beverage, health care, and institutional markets.” He will become president of Ecolab once the deal closes.

Ecolab CEO Douglas M. Baker Jr. says the acquisition “is a strong and vital step in broadening our business platform and enhancing our global growth opportunities.” Water management, he notes, is “a key future growth segment for us” and “is increasingly important to our customer base.”

In a conference call with analysts, Ecolab executives pointed out that the combined firm will achieve annual cost savings of $150 million but added that no layoffs of sales, service, or R&D employees are planned. Nalco has 600 R&D employees and Ecolab has 700. The executives expect to achieve business synergies by extending technologies across each other’s businesses.

John E. Roberts, a stock analyst at Buckingham Research, noted in a report to clients that the two firms share a number of traits that could make the combination work: Both focus on water-based chemistry, sell premium-priced products that save customers money, and are highly service intensive.

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