STRENGTHENS POSITION IN FAST-GROWING ENERGY
SERVICES MARKET
Ecolab also raises third quarter adjusted EPS forecast to $0.87, +16%
Acquisition Highlights:
-
Better positions Ecolab's Global Energy Services to fully
capitalize on major energy opportunities
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Highly complementary geography, technology and customer base
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Strengthens North American business, better positioning us to
fully capitalize on the new oil and gas opportunities
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Enhances our technology, further strengthening our capabilities
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Significant accretion/leverage opportunities
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Accretive to sales growth, adjusted EBITDA margins and adjusted EPS
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2013 adjusted EPS accretion of approximately $0.12 per share
increasing to approximately $0.50 per share by 2016
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Expect $150 million run-rate cost synergies by end of 2015; $50
million in 2013
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Drives improved ongoing leverage in global supply chain
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Makes Ecolab stronger
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Strengthens position in fastest growth segment
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Has de minimis impact on company cyclicality as business focus is
principally on production phase of energy business
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Acquisition improves our earnings potential going forward
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Deal structure maintains strong investment grade balance sheet;
plan to return to ‘A range' metrics within 3 years
ST. PAUL, Minn.--(BUSINESS WIRE)--
Ecolab Inc. announced that it has agreed to acquire privately held
Champion Technologies and its related company Corsicana Technologies
(hereafter collectively referred to as Champion) in a transaction valued
at approximately $2.2 billion, to be paid through a mix of approximately
75% cash and 25% stock. Champion is a Houston, Texas-based global energy
specialty products and services company with approximately 3,300
employees in more than 30 countries delivering product and service-based
offerings to the oil and gas industry. 2011 sales were $1.2 billion.
Closing is expected to occur by year-end 2012, subject to regulatory
clearance and other customary closing conditions.
Douglas M. Baker, Jr., Ecolab's Chairman and Chief Executive Officer
commented on the announcement, saying, "This transaction represents a
rare opportunity to build on our position in a fast growing market by
improving our geographic coverage and technology offerings. As a premier
company and proven innovator committed to delivering outstanding
technology and service, Champion represents a very attractive business
that opportunistically became available, enabling us to acquire an
outstanding operator. Champion's technology and product strengths in the
U.S. and Canada are very complementary to our innovative technology and
services in the offshore and international energy markets. We are
excited by the additional solutions we will be able to bring to our
customers and the strong growth potential this opportunity offers for
our combined operations as we continue to target the "new energy"
opportunities which require significantly more of the products and
services that both we and Champion provide."
Baker continued, saying, "The deal is terrific financially as well. 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. It is also highly synergistic, driving a run-rate of $150
million in cost synergies by the end of 2015. As a result, we expect it
to be accretive to sales growth, accretive to EBITDA margins and
accretive to adjusted EPS."
Steve Lindley, Champion Technologies' Chairman said, "This is a
compelling strategic deal that provides us the possibility to fully
capitalize on significant energy market opportunities around the world.
We have always regarded Ecolab's Nalco Global Energy Services as a
leader in this marketplace with a similar culture and like-minded focus
on serving the customer. We look forward to working together with Ecolab
to realize the benefits for all of our stakeholders, including our
customers and employees."
Ecolab will pay approximately $1.7 billion in cash and issue
approximately 8 million shares of Ecolab common stock, subject to
certain adjustments at and after closing.
The transaction is expected to close by year-end and be cash and
earnings accretive in 2013, the first full year of the combined entity.
Ecolab expects to realize attractive synergies from the Champion
transaction totaling a run-rate of approximately $150 million by the end
of 2015 through integration activities wholly within the Global Energy
Services sector and that it will not impact the Nalco integration work.
Ecolab expects to maintain its strong investment grade credit rating
post-acquisition and is planning to return to ‘A range' metrics within
the next three years. Returns on invested capital are also expected to
show sustained improvement going forward.
Ecolab expects to complete the remaining $280 million of its previously
announced $1 billion share repurchase program in 2013.
Baker concluded by saying, "This transaction enables us to make an
important strategic investment in one of our key growth businesses, and
we will continue to further develop our core strengths in food safety,
healthcare, water and energy as we further build our business. We are
excited by the improved position and opportunities Champion brings us to
better serve our customers, grow our business, and to deliver continued
strong shareholder returns."
Third Quarter Forecast Update
Ecolab will announce results for its third quarter ended September 30,
2012 on October 30. Ecolab said that it expects adjusted earnings per
share for its third quarter to be $0.87, which is at the high end of its
previous range and represents 16% growth versus last year; Ecolab also
continues to expect that free cash flow for the second half period will
be strong, approximating or exceeding net income. Ecolab had previously
forecast third quarter adjusted earnings per share to be $0.83 — $0.87.
Ecolab expects reported earnings per share for the third quarter ended
September 30, 2012 to be $0.80 per share, reflecting approximately a net
$0.07 per share of special charges in the quarter.
About Ecolab
With 2011 pro forma sales of $11 billion and more than 40,000 employees,
Ecolab Inc. (NYSE: ECL) is the global leader in water, hygiene and
energy technologies and services that provide and protect clean water,
safe food, abundant energy and healthy environments. Ecolab delivers
comprehensive programs and services to the food, energy, healthcare,
industrial and hospitality markets in more than 160 countries. More
Ecolab news and information is available at www.ecolab.com.
About Champion Technologies
Champion Technologies is a global specialty chemical company with 3,300
employees in more than 30 countries delivering innovative and engineered
programs for upstream, midstream, and downstream oil and gas markets.
CorsiTech is a global specialty chemical organization dedicated to
meeting and exceeding customers' technical needs in the drilling,
stimulation and completion markets.
Webcast Details
Ecolab will host a live webcast to review this announcement today at
8:30 a.m. Eastern Time. To participate in the call via telephone, dial
1-888-469-1764 from the U.S./Canada, using the password: Ecolab. The
webcast, along with related presentation slides, will be available to
the public on Ecolab's website at www.ecolab.com/investor.
A replay of the webcast and related materials will be available at that
site through October 26, 2012.
Listening to the webcast requires Internet access, the Windows Media
Player or other compatible streaming media player.
Cautionary Statements Regarding Forward-Looking Information
This communication contains certain statements relating to future events
and our intentions, beliefs, expectations and predictions for the future
which are forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. Words or phrases such
as "will likely result," "are expected to," "will continue," "is
anticipated," "we believe," "we expect," "estimate," "project," "may,"
"will," "intend," "plan," "believe," "target," "forecast" (including the
negative or variations thereof) or similar terminology used in
connection with any discussion of future plans, actions or events
generally identify forward-looking statements. These forward-looking
statements include, but are not limited to, statements regarding
benefits of the Champion acquisition, integration plans and expected
synergies, the expected timing of completion of the acquisition, credit
ratings impact from the acquisition, future cash flow and debt
repayment, anticipated future financial and operating performance and
results, including estimated third quarter earnings per share, second
half 2012 free cash flow and net income, synergy estimates and timing
and benefits of the acquisition, future earnings per share and cash flow
accretion, returns of invested capital, debt repayment, stock
repurchases, investments and future acquisitions and estimates for
growth. These statements are based on the current expectations of
management of the company. There are a number of risks and uncertainties
that could cause actual results to differ materially from the
forward-looking statements included in this communication. These risks
and uncertainties include (i) the risk that the regulatory approvals or
clearances required for the acquisition may not be obtained, or that
required regulatory approvals may delay the acquisition or result in the
imposition of conditions that could have a material adverse effect on
the company or cause the company to abandon the acquisition, (ii) the
risk that the conditions to the closing of the acquisition may not be
satisfied, (iii) the risk that a material adverse change, event or
occurrence may affect the company or Champion prior to the closing of
the acquisition and may delay the acquisition or cause the company to
abandon the acquisition, (iv) problems that may arise in successfully
integrating the businesses of the company and Champion, which may result
in the combined business not operating as effectively and efficiently as
expected, (v) the possibility that the acquisition may involve
unexpected costs, unexpected liabilities or unexpected delays, (vi) the
risk that the credit ratings of the company may be different from what
the company currently expects, (vii) the risk that the businesses of the
company or Champion may suffer as a result of uncertainty surrounding
the acquisition and (viii) the risk that disruptions from the
transaction will harm relationships with customers, employees and
suppliers.
Other unknown or unpredictable factors could also have material adverse
effects on future results, performance or achievements of the company,
Champion and the combined business. For a further discussion of these
and other risks and uncertainties applicable to the company, see the
company's Quarterly Report on Form 10-Q for the quarter ended June 30,
2012 and the company's other public filings with the Securities and
Exchange Commission (the "SEC"). In light of these risks, uncertainties,
assumptions and factors, the forward-looking events discussed in this
communication may not occur. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the
date of this communication. The company does not undertake, and
expressly disclaims, any duty to update any forward-looking statement
whether as a result of new information, future events or changes in
expectations, except as required by law.
Non-Solicitation
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be any
sale of securities in any jurisdiction in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under
the securities laws of any such jurisdiction.
Non-GAAP Financial Information
This news release includes financial measures that have not been
calculated in accordance with accounting principles generally accepted
in the U.S. (GAAP), including adjusted diluted earnings per share,
adjusted EBITDA and free cash flow. We provide these measures as
additional information regarding our operating results. We use these
non-GAAP measures internally to evaluate our performance and in making
financial and operational decisions, including with respect to incentive
compensation. We believe that our presentation of these measures
provides investors with greater transparency with respect to our results
of operations and that these measures are useful for period-to-period
comparison of results.
We include in special gains and charges items that are unusual in
nature, significant in amount and important to an understanding of
underlying business performance. In order to better allow investors to
compare underlying business performance period-to-period, we provide
adjusted diluted earnings per share, which excludes special gains and
charges and discrete tax items.
Adjusted EBITDA is defined as operating income, before depreciation and
amortization, and excludes special gains and charges. We provide
adjusted EBITDA as we believe that it is an important measure of
operating performance because it allows management, investors and others
to evaluate and compare our core operating results from period to period
by removing the impact of our capital structure (interest expense from
our outstanding debt), asset base (depreciation and amortization), and
changes in tax rates. Furthermore, we use adjusted EBITDA for business
planning purposes and to evaluate and price potential acquisitions.
Free cash flow is defined as cash from operations less capital
expenditures; it is a useful measure of funds that can be used for
business investments, strategic acquisitions and to reduce debt.
The non-GAAP financial measures are not in accordance with, or an
alternative to, GAAP, and may be different from non-GAAP measures used
by other companies. Investors should not rely on any single financial
measure when evaluating our business. We recommend that investors view
these measures in conjunction with the applicable GAAP measures.
(ECL-A)
Ecolab Inc.
Michael J. Monahan, 651-293-2809
Lisa L. Curran,
651-293-2185
Source: Ecolab Inc.
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