Ecolab Expands Global Water Segment

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Leading manufacturer of cleaning and sanitation products company, Ecolab Inc. (ECL), has entered into an agreement to acquire AkzoNobel’s Purate franchise in order to expand its Global Water business. No financial details of the deal have been provided by the company.

Purate is a producer of chlorine dioxide which is used as an antimicrobial agent in cooling towers and other industrial water treatment applications. Ecolab plans to use Purate’s patented technology with its own 3D Trasar cooling water technology, which is an automated system used to clean industrial waters in a cost-effective manner.

3D Trasar technology has been developed by Nalco, which Ecolab took over in Dec 2011. Following the acquisition, this technology has been incorporated into Ecolab’s new division, the Global Water segment. The 3D Trasar technology has received the U.S. Presidential Green Chemistry Award based on its ability to save water and energy as well as reduce operating cost.

In the last reported fourth quarter of 2012, Global Water sales were up 3% on a constant currency pro forma basis to $536.2 million. Higher sales reported in Latin America, Asia-Pacific and Canada along with modest improvement in Europe, led to revenue growth.

Ecolab serves the food service, food and beverage processing, healthcare, energy, water treatment and hospitality markets both in the U.S. as well as internationally. The company continues to invest in strategic areas such as health care, food, water and energy and global pest elimination to expand its business.

With a background of robust growth, Ecolab is poised to gain momentum via its aggressive strategy of pursuing acquisitions. Recently, Ecolab acquired Champions to become a giant in the oilfield chemical business and reduce competition for its Nalco subsidiary.

Although we are impressed by Ecolab’s strong international exposure, we remain cautious about aggressive competition. Challenging economic and market trends in 2013 together with unfavorable internal issues will likely be near-term headwinds for the company. Raw material price inflation also remains a cause of concern.

Ecolab currently has a Zacks Rank #3 (Hold) and is slated to report its first quarter 2013 earnings results tomorrow, Apr 30.

Other chemical-specialty companies such as Minerals Technologies Inc. (MTX), NewMarket Corporation (NEU) and Prospect Global Resources, Inc. (PGRX) warrant a look. All the stocks carry a Zacks Rank #2 (Buy).

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