Ecolab has solid quarter, says Champion approval seems close

  • Article by: DEE DEPASS , Star Tribune
  • Updated: February 26, 2013 - 8:57 PM

Ecolab Inc. told investors Tuesday that it still hopes to close on the acquisition of Champion Technologies next month despite antitrust concerns by the U.S. Department of Justice.

The $2.2 billion Champion deal was slated to close during the fourth quarter. But the purchase was halted in December when the Justice Department requested more information because of concerns that the oil-additives and treatment business may give Ecolab too big of a footprint in that industry.

Ecolab CEO Douglas Baker Jr. told analysts during a conference call about the company’s fourth-quarter performance that he expects the Champion acquisition to receive regulatory approval and to close during the first quarter of 2013.

“Ecolab and Champion remain in active and ongoing discussions with the U.S. Department of Justice regarding its review ... and we expect this to be a very, very good deal for us,” he said.

But in a statement, Ecolab warned, “While we believe we are close to resolving the Department of Justice’s remaining issues, it remains possible that the Champion acquisition will not be completed in the targeted time frame, or at all.”

In an earlier interview, Baker said that concerns over Champion arose because the opportunity to buy Champion came shortly after Ecolab’s December 2011 purchase of Nalco, a firm that’s also a player in the oil technology and services industry. Concerns about possible overlap between Nalco and Champion prompted regulatory scrutiny of the Champion deal, he said.

Justice officials declined to comment on the matter.

Shares jump 4.2 percent

on Tuesday at the end of tradingBecause of the uncertainty surrounding Champion, Ecolab’s 2013 guidance does not include its pending acquisition. Instead, Ecolab stuck to its former guidance and reiterated that 2013 adjusted earnings should be $3.38 to $3.48 a share, which includes a 35 cents per share restructuring charge. The forecast is 13 to 17 percent higher than 2012 results, despite a difficult European economy and weak paper industry sales.

First-quarter earnings are expected to grow 12 to 20 percent to between 56 and 60 cents a share. If the Champion deal goes through, Ecolab expects it will add about 50 cents per share a year by 2016, officials told analysts Tuesday.

For the fourth quarter, the St. Paul-based sanitizing, water and energy services firm posted earnings of $266 million, or 89 cents a share, excluding one-time charges and taxes. Sales grew 65 percent from a year ago to $3.04 billion, thanks mainly to the Nalco acquisition.

Results were in line with the average expectations of Wall Street analysts. Ecolab shares closed Tuesday at $75.83, up $3.03 or 4.2 percent.

Quarterly sales grew between 1 and 3 percent for Ecolab’s sanitizing/cleaning, water treatment, paper processing and pest elimination divisions. The biggest growth came in the firm’s global energy unit, which includes Nalco. Those sales rose 18 percent during the quarter to $596 million. The integration of Nalco remained on track and contributed about $75 million in synergy savings so far, officials said.

During the quarter, Ecolab benefited from increased sales volumes, prices, new products and customers, and a reduction in fourth-quarter raw material costs over a year ago. Material costs, however, began rising again in January and February.

Dee DePass • 612-673-77725

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