NLC Nalco Holding Company Common Stock

Leading cleaning and sanitation products company Ecolab Inc. (ECL) has won the key antitrust clearance for its proposed acquisition of Illinois-based water treatment company Nalco Holding Company (NLC) in a ca sh and stock deal worth roughly $8 billion.

The Minnesota-based company announced a deal to buy Nalco in July 2011. The transaction, which is now subject to approval of the shareholders of both the companies and customary regulatory clearances, is expected to close in fourth-quarter 2011. Following the deal closure, Nalco will merge with a subsidiary of Ecolab.

Nalco, with annual sales of $4 billion, is the global leader in water treatment services with operations stretching across more than 150 nations. It offers water management sustainability services and focuses on industrial water, energy and air applications. Nalco’s value-added services enable its customers to minimize energy, water and other natural resource consumption, reduce environmental releases and improve productivity.

The deal is highly complementary for Ecolab and will enable it to bolster its water management business. It marks the union of Nalco's market leadership in water and energy services with Ecolab's competency in food safety and cleaning.

The merger will enable the combined entity address major trends such as growing food demand and food safety, water scarcity, rising energy demand and healthcare needs for an  aging population. The integrated company will have roughly $1.5 billion in sales from fast growing emerging markets and will have global leadership positions in key end-markets.

The deal is expected to be accretive to the merged entity’s earnings in 2012 and beyond. There is also opportunity for attractive synergies with Ecolab expecting combined annual cost synergies of $150 million. Moreover, the combined entity will have strong balance sheet and cash flows which will allow it to invest in key growth areas and pare debt.    

Ecolab caters products and services for the hospitality, foodservice, institutional and industrial markets. It leads in cleaning, sanitizing, pest elimination and food safety solutions with revenues of $6 billion. Currently, we have a long-term Neutral recommendation on the stock.

 
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