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Feds poke deeper into Ecolab deal

Justice Department wants more information on purchase of Champion Technologies.

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FILE -- Attendees walk past the Ecolab Inc. booth at the Institute of Food Technologists Annual Meeting & Food Expo In Chicago, Illinois, U.S., on Monday, July 19, 2010.

Photo: Tim Boyle, Bloomberg

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Ecolab Inc.'s planned $2.2 billion acquisition of Champion Technologies Inc. is drawing scrutiny from federal antitrust regulators because of possible overlaps in their energy businesses.

The U.S. Department of Justice has submitted a second request to Ecolab for more information on the Champion deal, Ecolab said Tuesday in a filing with the Securities and Exchange Commission. Second requests generally indicate government concern over potential anticompetitive issues, and can eventually derail deals. However, Ecolab said in its filing it expects the Champion deal to close by the end of 2012.

"Ecolab has been and will continue to work cooperatively with the DOJ," the filing said. The government declined to comment on its request for more information.

Ecolab announced the surprise acquisition of Houston-based Champion in October. If allowed to proceed, the cash-and-stock deal would give Ecolab an additional 3,300 employees, $1.4 billion in annual sales and access to Champion's vast line of chemicals that thin, unclog and descale oil in drilling, hauling and refining operations.

But the Justice Department inquiry arose because "Our energy business and Champion's are in the same industry," said Mike Monahan, Ecolab's senior vice president of external relations. "However, we remain confident that we will be able to close by year-end and that we will get approval."

Last year, Ecolab announced it would acquire Nalco for $8 billion, which gave it a foothold in the booming energy segment. But having both Nalco and Champion likely raised eyebrows among federal authorities because both companies have a major energy presence.

According to Ecolab documents, Nalco largely focuses on offshore oil recovery processes and water treatment services for refineries and petrochemical makers. Its customer base consists of "super-major" oil companies. Meanwhile, Champion largely focuses on onshore customers and provides research and additive and diagnostic chemicals for the oil and gas sector.

It remains to be seen if the Justice Department will determine there is enough overlap between Nalco and Champion to either thwart the deal entirely or to demand the spin off of certain slices of the businesses.

Unlike Champion, the Nalco deal raised no red flags with the government.

"We did not have one [DOJ letter] with Nalco. But that was a business different than what we previously had," Monahan said.

Ecolab has been known for making cleaning and sanitizing chemicals for restaurants, hotels, hospitals and food and beverage factories.

Second information requests from the Justice Department aren't common. They were issued in only 4.1 percent of merger transactions submitted to federal antitrust regulators during the government's most recent fiscal year, according to a June report by the Justice Department and the Federal Trade Commission.

A second request can cover broad ground or specific products or markets, said James Burns, a lawyer and antitrust specialist at Dickinson Wright in Washington.

Sometimes, a deal's death knell

With a second request, antitrust regulators are essentially saying to a company, "'We would like you to provide an additional amount of documents, so we can drill down and analyze whether there is a competitive issue that we could challenge in court,'" Burns said.

It can be an expensive request for companies to comply with, and can entail significant delays, he said. Burns estimated that at least half of corporate mergers subject to second requests don't get completed.

Last month, 3M canceled a deal to buy Avery Dennison's label business after the Department of Justice threatened to sue over concerns about possible monopoly pricing.

Dee DePass • 612-673-7725 • ddepass@startribune.com Mike Hughlett • 612-673-7003 • mike.hughlett@startribune.com

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