Cleaning and pest-control service provider Ecolab Inc. (ECL) said Friday that it has agreed to buy privately-held specialty chemical company Champion Technologies and its related company Corsicana Technologies for about $2.2 billion in cash and stock.
Ecolab expects the deal to strengthen its position in the fast-growing energy services market and to be accretive to cash and earnings in 2013, the first full year of the combined entity. The company's shares are gaining more than 3.5 percent in pre-market trade.
St. Paul, Minnesota-based Ecolab now expects adjusted earnings for the third quarter at the high end of its previous range and in line with Wall Street estimates.
Ecolab said it will pay about $1.7 billion in cash and issue about 8 million shares of its common stock, subject to certain adjustments at and after closing of the deal. The transaction is expected to close by year-end 2012.
Houston, Texas-based Champion delivers product and service-based offerings to the oil and gas industry. The company, which employs about 3,300 employees in more than 30 countries, reported 2011 sales of $1.2 billion. Champion competes with companies such as Baker Hughes Inc. (BHI), Halliburton Co. (HAL) and Schlumberger Ltd (SLB).
Ecolab noted that Champion's technology and product strengths in the U.S. and Canada are very complementary to its own technology and services in the offshore and international energy markets.
Douglas Baker, chairman and chief executive officer of Ecolab said, "Like our current Nalco Global Energy Services business, Champion offers very attractive growth and an annuity-like revenue model generating steady and predictable earnings patterns similar to our legacy Ecolab businesses."
The company expects to realize attractive synergies from the deal totaling a run-rate of about $150 million by the end of 2015 through integration activities wholly within the Global Energy Services sector and also expects that it will not impact the Nalco integration work.
Ecolab hopes to maintain its investment-grade credit rating following the acquisition and return to 'A range' metrics within the next three years.
The company plans to complete the remaining $280 million of its previously announced $1 billion share repurchase program in 2013.
For the third quarter ended September 30, 2012, Ecolab now forecasts adjusted earnings per share of $0.87, which is at the high end of its previous range and represents 16 percent growth compared to last year. The company had previously forecast adjusted earnings per share for the quarter in a range of $0.83 to $0.87.
Ecolab expects reported earnings for the third quarter of $0.80 per share, reflecting approximately a net $0.07 per share of special charges in the quarter.
On average, analysts polled by Thomson Reuters expect the company to earn $0.87 per share for the quarter. Analysts' estimates typically exclude special items.
Ecolab continues to expect free cash flow for the second half period will be strong, equaling or exceeding net income.
ECL closed Thursday's trading at $63.67, up $0.04 on a volume of 868,600 shares. In Friday's pre-market, the stock is up $2.33 or 3.66 percent to $66.00.
by RTT Staff Writer
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