Safety and operational efficiency mega-trends spur Nalco takeover, says Ecolab

By Rory Harrington

- Last updated on GMT

Related tags Investment Stock market

Safety and operational efficiency mega-trends spur Nalco takeover, says Ecolab
Ecolab said it has completed the US$8.3bn (€6.4bn) takeover of Nalco as part of a strategy to tap into global mega-trends such as food safety and the need for industry players to maximize operational efficiencies such as energy and water reductions.

Both global giants in services to food and beverage processors, Ecolab specialises in cleaning, sanitizing and food safety, while Nalco focuses on helping companies cut consumption of energy, water and other natural resources.

Ecolab yesterday said the deal had been closed after receiving a final antitrust approval as well as the go-ahead from both sets of shareholders. The company intends to fund the transaction in a cash plus shares arrangement. It will issue almost 69m shares and pay Nalco shareholders $1.6bn to meet the $5.6bn valuation for the firm, as well as taking on its $2.7bn debt.

Key addition

The acquisition of Nalco, headquartered in the US state of Illinois, sees Ecolab almost double its workforce and annual sales to 38,000 and $11bn respectively.

Nalco works with a host of sectors, including food and beverage processing, across 150 countries and employs 12,000 people. The company will retain its name.

Ecolab spokesman Mike Monahan told that its new asset’s expertise in food and beverage plants had been a key driver in the takeover.

“We see a great opportunity to expand our customer offering in water treatment, especially for food and beverage plants,”​ he added.

The spokesman described Nalco’s food and beverage know-how as a “key addition”​ to Ecolab’s portfolio.

The company said the deal would position it to capitalize on industry mega-trends such as growth in food demand, food safety challenges, energy demands, water scarcity and shifting economic trends.

Douglas M. Baker, Jr., Ecolab chairman, president and CEO, said: "This merger is a strong and vital step in broadening our business platform and enhancing our global growth opportunities. 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’s penetration in high-growth emerging markets offered “terrific future potential”​ for the company, he added.

Synergies and investment

The transaction would yield savings of $150m in the form of synergies, with Monahan explaining these would come from efficiencies in general and administrative and supply chain areas.

“There will be no reductions in the sales or R&D areas. We intend to invest more in those areas, “​added the spokesman.

Ecolab chief Baker declared that the takeover would boost Nalco’s expansion.

“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​,” he said. “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.”