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Leading cleaning and sanitation products company Ecolab Inc (ECL - Analyst Report) is planning to buy back $1 billion worth of shares. The repurchase will be executed following the closure of the Minnesota-based company’s acquisition of water treatment company Nalco Holding Company (). The $8 billion Nalco deal is expected to close in fourth-quarter 2011.

The planned repurchase will be executed from time to time in privately negotiated transactions based on market conditions. The buyback program is expected to complete by end-2012.

Ecolab’s Board, in August 2011, raised the company’s repurchase authorization by 10 million additional shares to roughly 28 million shares, contingent on the Nalco deal closure. The company had roughly 232 million shares outstanding as of July 31, 2011, and will issue about 69 million additional shares in the Nalco transaction as part of the purchase consideration.

Ecolab remains committed to delivering incremental returns to investors leveraging a solid balance sheet, healthy cash flow and earnings stability. The company bought back roughly 2.4 million shares during first-half 2011.

During its most recent earnings call, Ecolab raised its earnings forecast for 2011. The company expects its quarterly profit in second-half 2011 to be boosted by higher sales volume, pricing, margin leverage, new products as well as synergies from acquisitions and European restructuring.

Ecolab leads in cleaning, sanitizing, pest elimination and food safety solutions with annual sales of roughly $6 billion. The company is investing in product innovation and sales organization while rationalizing operating costs to enhance margins.

While Ecolab’s strong international exposure (especially in emerging markets) and recovery across its end-markets are encouraging, aggressive competition and raw material inflation remain a concern. Currently, we have a long-term Neutral rating on the stock, which is supported by a short-term Zacks #3 Rank (Hold).

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