Ecolab Inc. and Nalco Holding Company announced the board of
directors of both companies have unanimously approved a definitive
agreement under which Nalco will merge with a subsidiary of Ecolab
in a transaction valued at approximately $8 billion, including
assumed Nalco net debt.
Douglas M. Baker (left), chairman of the
board, president and chief executive officer, Ecolab Inc., and J.
Erik Fyrwald, chairman of the board, president and chief executive
officer, Nalco Holding Company, today announced an agreement to
merge their companies. The combined company, Ecolab Inc., will be
headquartered in St. Paul, Minnesota. (Photo: Rick Peters)
Based in Naperville, Illinois, with operations in more than 150
countries, Nalco is the world's leading water treatment and process
improvement company, offering water management sustainability
services focused on industrial, energy and institutional market
segments. Nalco delivers significant environmental, social and
economic performance benefits to customers through value-added
services in water treatment and management, pollution reduction
programs, energy conservation, and oil and gas extraction
efficiency and sustainability offerings. Nalco sales were $4
billion in 2010.
Under the terms of the transaction, Nalco shareholders will have
the option to receive either 0.7005 shares of Ecolab common stock
or $38.80 per Nalco share in cash, without interest, subject to
proration such that the overall consideration paid to Nalco
shareholders will be approximately 70% in Ecolab shares and 30% in
cash. The stock component of the consideration will represent a
tax-free exchange. In aggregate, Ecolab will issue approximately
68.9 million shares of Ecolab stock and pay approximately $1.6
billion in cash to Nalco shareholders. This represents a
fully-diluted offer value for Nalco’s equity of $5.4 billion and,
inclusive of $2.7 billion in Nalco net debt, a total transaction
value of $8.1 billion.
The transaction is expected to close in the fourth quarter,
subject to customary closing conditions, regulatory clearance, as
well as approval of both Ecolab and Nalco shareholders.
Ecolab also announced that it expects adjusted earnings per
share for the quarter ended June 30, 2011 to be $0.64, at the top
end of its forecasted range for the quarter. In addition, Ecolab
has raised its full year 2011 adjusted earnings per share forecast,
before consideration of the transaction, to $2.52 to $2.56 from
$2.49 to $2.53. As previously announced, Ecolab expects to report
second quarter 2011 results on July 27, 2011.
Douglas M. Baker, Jr., Ecolab’s Chairman, President and Chief
Executive Officer commented on the announcement, saying, “This
merger is a strong and vital step in broadening our business
platform and enhancing our global growth opportunities. The key to
Ecolab’s long record of consistent and above-average growth has
been our ability to continually expand the markets we serve, meet
the needs of the customers within these markets, and execute.
Through our participation in the water sector and our strategic
planning work, we identified water management as a key future
growth segment for us given its growth characteristics and
importance to our customers. Nalco is the global leader with deep
expertise in programs and services to enhance water process
efficiency, extend asset life, and improve their customers' end
products. Nalco’s water and oil and gas services end markets in
particular represent excellent long term growth potential as the
world deals with the quality, cost and availability of those key
natural resources. Further, its geographic exposure to high-growth
emerging markets offers terrific future potential for the combined
companies.”
Erik Fyrwald, Nalco’s Chairman, President and Chief Executive
Officer said, “This is a compelling strategic transaction that
delivers an immediate premium to our shareholders and the
opportunity to participate in the significant upside potential of
the combined organization. We have long admired Ecolab, and we
share similar cultures and business models. We look forward to
working together to realize the benefits for all of our
stakeholders, including our shareholders, customers and
employees.”
Baker also said, “This merger is driven by the outstanding
top-line opportunities that we believe our combined companies can
more effectively achieve as one. We believe we can help accelerate
Nalco’s investments in its product innovation and sales and service
force, enhancing the range of effective and efficient solutions for
both of our customers and bolstering growth prospects for both our
firms. We expect that together we will have stronger, more
consistent long-term growth opportunities, and together we will
have the people, business and financial resources to capture that
growth. We are excited by the potential our combined operations
offer and the improved solutions we will bring to our customers, as
well as additional opportunities for both companies’ associates,
and we presently expect 2012 adjusted earnings per share for the
combined companies to be approximately $3 per share.
Baker concluded by saying, “Through this combination, we will
continue to invest in and expand our products and services to our
existing customers while adding new opportunities for better
customer service. We look forward to completing the transaction and
joining our two great companies together in developing new and
improved solutions for critical customer needs, and in turn deliver
even better shareholder returns.”
Strategic Highlights:
- Market Leaders Serving
Mega-Trends: Making the world cleaner, safer, healthier and
more sustainable leverages mega trends including water scarcity,
food safety, increasing energy demand, a larger and older
population, and increasing human health challenges.
- Nalco is well-positioned to benefit
from water, energy and emerging market trends, all providing strong
long-term potential.
- Proven model of great technology and
superior field service.
- Talented new management team that has
re-focused the company on growth.
- Ecolab is well-positioned in food
safety and healthcare, benefiting from an increasing global focus
on cleaning and sanitizing.
- Leading technologies and the largest
and best-trained sales and service force.
- Proven and seasoned management team
that has consistently delivered.
- Strengthened Combined
Foundation: Global leadership positions in major end markets
provides improved business balance.
- Strengthened Emerging Markets
Exposure: The combined company will have approximately $1.5
billion revenue position in high growth emerging markets.
- Leading Customers: Both
companies serve the leaders in their end markets and have
longstanding customer relationships built on premium products and
service.
- Compatible and Complementary:
Great fit in corporate cultures, technologies, competencies and
business models.
- Nalco offers strong compatibility and a
natural complement to Ecolab
- Business model and value proposition
fit with Ecolab’s
- Growth and service mindset consistent
across both companies
- Water treatment is a core need for
Ecolab’s customers, and presents an essential Circle the Customer
opportunity
- Leadership continuity: Nalco
operating management team will join Ecolab
- Attractive Synergies: Expect
approximately $150 million in combined cost synergies
- Solid financial performance with
potential for improved growth
- Accretive to EPS in current year and
beyond
- Increased financial strength
- Strong post-merger balance sheet with
expected strong investment grade rating due to the limited cash
component in the transaction
- Strong cash flow allows for both
business investment in critical growth drivers and for debt
reduction
Bank of America Merrill Lynch acted as exclusive financial
advisor to Ecolab in connection with the transaction and Baker
& McKenzie acted as legal counsel.
About EcolabWith sales of $6 billion and more than 26,000
associates, Ecolab Inc. (NYSE: ECL) is the global leader in
cleaning, sanitizing, food safety and infection prevention products
and services. Ecolab delivers comprehensive programs and services
to foodservice, food and beverage processing, healthcare, and
hospitality markets in more than 160 countries. More news and
information is available at www.ecolab.com.
About NalcoNalco (NYSE: NLC) is the world's largest
sustainability services company focused on industrial water, energy
and air applications, delivering significant environmental, social
and economic performance benefits to their customers. Nalco helps
customers reduce energy, water and other natural resource
consumption, enhance air quality, minimize environmental releases
and improve productivity and end products while boosting the bottom
line. Its comprehensive solutions contribute to the sustainable
development of customer operations. More than 12,000 Nalco
employees operate in 150 countries supported by a comprehensive
network of manufacturing facilities, sales offices and research
centers to serve a broad range of end markets. In 2010, Nalco
achieved sales of $4 billion. For more information visit
www.nalco.com.
Ecolab will host a live webcast to review this announcement and
updated earnings guidance today at 9:00 a.m. Eastern Time. To
participate in the call via telephone, dial 1-888-787-0203 from the
U.S./Canada, using the password: Conference call. The webcast,
along with related presentation slides, will be available to the
public on Ecolab's website at www.ecolab.com/investor. A replay of
the webcast and related materials will be available at that
site.
Listening to the webcast requires Internet access, the Windows
Media Player or other compatible streaming media player.
Cautionary Statements Regarding Forward-Looking
Information
This news release contains certain statements relating to future
events and our intentions, beliefs, expectations and predictions
for the future which are forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995.
Words or phrases such as “will likely result,” “are expected to,”
“will continue,” “is anticipated,” “we believe,” “we expect,”
“estimate,” “project,” “may,” “will,” “intend,” “plan,” “believe,”
“target,” “forecast” (including the negative or variations thereof)
or similar terminology used in connection with any discussion of
future plans, actions or events generally identify forward-looking
statements. These forward-looking statements include, but are
not limited to, statements regarding benefits of the merger,
integration plans and expected synergies, the expected timing of
completion of the merger, and anticipated future financial and
operating performance and results, including estimates for growth.
These statements are based on the current expectations of
management of Ecolab and Nalco, as applicable. There are a number
of risks and uncertainties that could cause actual results to
differ materially from the forward-looking statements included in
this communication. These risks and uncertainties include
(i) the risk that the stockholders of Nalco may not adopt the
merger agreement, (ii) the risk that the stockholders of Ecolab may
not approve the issuance of Ecolab common stock to Nalco
stockholders in the merger, (iii) the risk that the companies
may be unable to obtain regulatory approvals required for the
merger, or that required regulatory approvals may delay the merger
or result in the imposition of conditions that could have a
material adverse effect on the combined company or cause the
companies to abandon the merger, (iv) the risk that the
conditions to the closing of the merger may not be satisfied,
(v) the risk that a material adverse change, event or
occurrence may affect Ecolab or Nalco prior to the closing of the
merger and may delay the merger or cause the companies to abandon
the merger, (vi) the risk that an unsolicited offer by another
company to acquire shares or assets of Ecolab or Nalco could
interfere with or prevent the merger, (vii) problems that may arise
in successfully integrating the businesses of the companies, which
may result in the combined company not operating as effectively and
efficiently as expected, (viii) the possibility that the
merger may involve unexpected costs, unexpected liabilities or
unexpected delays, (ix) the risk that the credit ratings of the
combined company or its subsidiaries may be different from what the
companies currently expect, (x) the risk that the businesses
of the companies may suffer as a result of uncertainty surrounding
the merger and (xi) the risk that disruptions from the transaction
will harm relationships with customers, employees and
suppliers.
Other unknown or unpredictable factors could also have material
adverse effects on future results, performance or achievements of
Ecolab, Nalco and the combined company. For a further discussion of
these and other risks and uncertainties applicable to the
respective businesses of Ecolab and Nalco, see the Annual Reports
on Form 10-K of Ecolab and Nalco for the fiscal year ended
December 31, 2010 and the companies’ other public filings with
the SEC. These risks, as well as other risks associated with the
merger, will be more fully discussed in the joint proxy
statement/prospectus that will be included in the Registration
Statement on Form S-4 that Ecolab will file with the SEC in
connection with the merger. In light of these risks, uncertainties,
assumptions and factors, the forward-looking events discussed in
this communication may not occur. Readers are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date of this communication. Neither Ecolab nor
Nalco undertakes, and each of them expressly disclaims, any duty to
update any forward-looking statement whether as a result of new
information, future events or changes in their respective
expectations, except as required by law.
Additional Information and Where to Find it
Ecolab will file with the Securities and Exchange Commission
(the “SEC”) a registration statement on Form S-4 that will include
a joint proxy statement of Ecolab and Nalco that will also
constitute a prospectus of Ecolab relating to the proposed
transaction. WE URGE INVESTORS AND SECURITY HOLDERS TO READ THE
REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS AND ANY
OTHER RELEVANT DOCUMENTS WHEN THEY BECOME AVAILABLE, BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION about Ecolab, Nalco and the
proposed merger. Investors and security holders will be able to
obtain these materials (when they are available) and other
documents filed with the SEC free of charge at the SEC’s website,
www.sec.gov. In addition, copies of the registration statement and
joint proxy statement/prospectus (when they become available) may
be obtained free of charge by accessing Ecolab’s website at
www.ecolab.com by clicking on the “Investor” link and then clicking
on the “SEC Filings” link or by writing Ecolab at 370 Wabasha
Street North, Saint Paul, Minnesota, 55102, Attention: Secretary or
by accessing Nalco’s website at www.nalco.com by clicking on the
“Investors” link and then clicking on the “SEC Filings” link or by
writing Nalco at 1601 West Diehl Road, Naperville, Illinois 60563,
Attention: Secretary and security holders may also read and copy
any reports, statements and other information filed by Ecolab or
Nalco with the SEC, at the SEC public reference room at 100 F
Street, N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 or visit the SEC’s website for further information
on its public reference room.
Participants in the Merger Solicitation
Ecolab, Nalco and certain of their respective directors,
executive officers and other members of management and employees
may be deemed to be participants in the solicitation of proxies in
respect of the proposed transaction. Information regarding Ecolab’s
directors and executive officers is available in its proxy
statement filed with the SEC by Ecolab on March 18, 2011 in
connection with its 2011 annual meeting of shareholders, and
information regarding Nalco’s directors and executive officers is
available in its proxy statement filed with the SEC by Nalco on
March 14, 2011 in connection with its 2011 annual meeting of
shareholders. Other information regarding the participants in the
proxy solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in
the registration statement and joint proxy statement/prospectus and
other relevant materials to be filed with the SEC when they become
available.
Non-Solicitation
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such
jurisdiction.
Non-GAAP Financial Information
This news release includes financial measures that have not been
calculated in accordance with accounting principles generally
accepted in the U.S. (GAAP), including adjusted diluted earnings
per share. We provide this measure as additional information
regarding our operating results. We use this non-GAAP measure
internally to evaluate our performance and in making financial and
operational decisions, including with respect to incentive
compensation. We believe that our presentation of this measure
provides investors with greater transparency with respect to our
results of operations and that these measures are useful for
period-to-period comparison of results.
We include in special gains and charges items that are unusual
in nature, significant in amount and important to an understanding
of underlying business performance. In order to better allow
investors to compare underlying business performance
period-to-period, we provide adjusted diluted earnings per share,
which excludes special gains and charges and discrete tax
items.
The non-GAAP financial measures are not in accordance with, or
an alternative to, GAAP, and may be different from non-GAAP
measures used by other companies. Investors should not rely on any
single financial measure when evaluating our business. We recommend
that investors view these measures in conjunction with the
applicable GAAP measures.
(ECL-A)
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