A United Kingdom regulator has ordered St. Paul-based Ecolab to divest its newly acquired Holchem cleaning-products business because it may result in less competition and ramped up prices — a ruling with which Ecolab "strongly disagrees."
Ecolab purchased Holchem Group Limited for an undisclosed price late last year. The deal gave the St. Paul-based company a cleaning-products firm with operations in England and Ireland and $56 million in revenue — a small piece of the $14.7 billion cleaning-product giant.
Ecolab on Monday disclosed that the United Kingdom's Competition and Markets Authority (CMA) had finished reviewing the merger and ruled the deal could ultimately lessen competition, stoke prices and lower the quality of products.
"We strongly believe that the U.K. market would remain highly competitive following the merger and are disappointed with the CMA's findings," said Ecolab CEO Douglas Baker in a statement. "We are reviewing the full report provided by the CMA in detail and will carefully consider our options and next steps."
Ecolab was required to file a response to the summer ruling by the CMA, which said both Ecolab and Holchem separately were two of the largest suppliers of cleaning chemicals to food and drink manufacturers in the U.K. The merger, the panel said, left only three players of any significant size competing in the U.K., and it made Ecolab's business much larger than any of the competitors'.
"The CMA is concerned that this could mean food and drink manufacturers face higher prices or a lower quality of service for cleaning chemicals," the ruling said.
Kirstin Baker, who led the investigation committee, said after weighing other remedies, the CMA decided "only blocking the merger and requiring Ecolab to sell Holchem would address our concerns."
Ecolab's stock fell 1.8% in trading on Monday to $191.11.
Holchem is one of about a dozen smaller acquisitions by Ecolab in the past few years.
This year, the company bought Georgia-based food-safety products manufacturer called Chemstar Corp. that generates about $40 million in annual revenue; U.K. health care sanitation firm Bioquell PLC; and a small Swiss online training firm.
Ecolab will release its third-quarter earnings on Oct. 29.