Leading cleaning and sanitation products company Ecolab Inc (NYSE:ECL) recently stated that it has arranged a committed bank financing worth $3.5 billion, which will enable it to fund the acquisition of water treatment company Nalco Holding Company (NYSE:NLC).
The Minnesota-based company has entered into a new $2 billion 364-day revolving credit facility and a $1.5 billion five-year revolving credit facility. Ecolab noted that it will utilize these credit facilities for general corporate purposes, including share buybacks, debt repayments and acquisitions. Notably, the senior credit facilities will be used to finance the Nalco buyout.
Ecolab announced that it would buy Nalco in July 2011. The company recently received antitrust clearance for the acquisition. The transaction, which is now subject to approval of the shareholders of both the companies and other customary closing conditions, is expected to close in fourth quarter 2011. Following the deal closure, Nalco will merge with a subsidiary of Ecolab.
The deal is a strategic fit and highly complementary for Ecolab as it will bolster its water management business. It marks the union of Nalco's market leadership in water and energy services with Ecolab's competency in food safety and cleaning.
Ecolab caters products and services for the hospitality, foodservice, institutional and industrial markets. It leads in cleaning, sanitizing, pest elimination and food safety solutions with revenues of $6 billion.
Ecolab’s strong international exposure (especially in emerging markets) and recovery across its end-markets are encouraging. However, aggressive competition and raw material inflation remain concerns. Currently, we have a long-term Neutral rating on Ecolab, which is backed by a short-term Zacks #3 Rank (Hold).