Issue Date: October 22, 2012 | Web Date: October 19, 2012
Ecolab To Pay $2.2 Billion For Oil And Gas Chemicals Firm Champion
Industrial hygiene and cleaning products company Ecolab has agreed to buy Champion Technologies, a privately held oil and gas chemicals firm, for $2.2 billion. The two companies say the deal strongly complements Ecolab’s September 2011 purchase of Nalco, a provider of services to the water and energy sectors.
The combination of Nalco and Champion will expand the portion of Ecolab that serves the energy market, analysts say. Champion develops and sells performance chemicals to the oil and gas industry, with most sales targeting drilling applications. The firm’s products include biocides, scale inhibitors, and water treatment chemicals.
“Champion’s technology and product strengths in the U.S. and Canada are very complementary to our innovative technology and services in the offshore and international energy markets,” says Ecolab CEO Douglas M. Baker Jr. With the purchase, Baker adds, Ecolab is targeting opportunities in what he calls “new energy,” which refers to oil and gas from difficult-to-access sources such as shale, oil sands, and aging oil wells.
Champion had sales of $1.2 billion in 2011 and employs 3,300 workers worldwide. The Houston-based company operates more than 100 locations in 30 countries and has manufacturing facilities in Texas, Canada, the Netherlands, and Scotland.
The acquisition will strengthen Ecolab’s position in the North American shale market, according to Laurence Alexander, chemical stock analyst at the investment firm Jefferies & Co. “There should be a strong cultural fit in the way the businesses go to market and similar customer bases,” he wrote in a note to investors. “Ecolab plans to leverage the combination to deliver best-in-class technology and service offerings at critical mass.”
Ecolab says it will pay for the acquisition with $1.7 billion in cash and by issuing 8 million shares of common stock. Some of the cash will be generated by Ecolab’s agreement to sell its vehicle cleaning and protection products business to cleaning products firm Zep for $120 million. Ecolab expects to close the transaction by the end of the year and to realize $150 million in cost synergies by the end of 2015.
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