ECL Amends Champion Bill to $2.16B

Ecolab Inc (ECL - Analyst Report) disclosed that its acquisition deal with Permian Mud Service, the parent company of Champion Technologies and Corsicana Technologies now stands altered. Ecolab had in October agreed to acquire privately-owned Champion Technologies and its related company Corsicana Technologies in a cash and stock deal.

According to the amendments, Ecolab will not take over Champion’s downstream process and water solutions business as it will be spun-off to Permian’s stockholders before the buyout. The downstream business mainly served refineries. Consequently, the value of the transaction has been revised to $2.16 billion compared with the prior value of $2.2 billion.

The modifications in the terms are not expected to have a significant impact on the economic aspects of the acquisition because a peripheral franchise of Champion (which accounted for only $50 million in revenues in 2011) now stands excluded from the acquisition. It will be accretive to Ecolab’s adjusted earnings per share for 2013 by 12 cents, as notified earlier. The accretion is expected to increase significantly to 50 cents per share by 2016.

Expected for closure before the end of 2012, the transaction is Ecolab’s effort to expand its Global Energy Services franchise. This is Ecolab’s biggest acquisition since the company acquired Nalco in 2011 in a cash and stock deal worth roughly $8 billion. These deals reinforce the fact that the company keeps a keen eye out for strategic acquisitions from time to time, the last one being Mexico-based Quimiproductos S.A. de C.V., a wholly-owned subsidiary of leading consumer goods company, Fomento Econ (FMX - Analyst Report).

We currently have a ‘Neutral’ recommendation on Ecolab. The stock carries a Zacks #3 Rank which translates into a short-term Hold rating.