Ecolab Inc. (ECL), a leading manufacturer of cleaning and sanitation products, has completed its previously announced acquisition of Mexico-based Quimiproductos S.A. de C.V., a wholly-owned subsidiary of leading consumer goods company, Fomento Econ (FMX).
In September last year, Ecolab had announced a definitive agreement to acquire the aforementioned entity. However, the company did not provide any financial details of the transaction.
Quimiproductos produces and supplies cleaning, sanitizing and water treatment goods and services to breweries and beverage companies located in Mexico. It also operates in the Central and South America. In 2012, the company’s revenues are estimated to be $43.4 million.
Ecolab has a significant presence in international markets, with Asia-Pacific and Latin America representing the key growth areas for its overseas operations. Ecolab’s Food and Beverage business in Latin America is growing at a double-digit rate on the back of solid demand in the beverage and brewing markets along with new accounts and investments in strategic sales areas. The company’s Latin American sales jumped 20% in the last reported quarter. We believe that the acquisition of Quimiproductos should further boost the business in the near-term.
St. Paul, Minnesota-based Ecolab serves the foodservice, food and beverage processing, healthcare, and hospitality markets in the U.S. and abroad. We are encouraged by the company’s consistent performance of delivering double-digit earnings growth despite the challenging business environment.
Ecolab is currently involved in the acquisition of a leading specialty chemical company, Champion Technologies and its related company Corsicana Technologies. The deal worth $2.16 billion would be the company’s largest acquisition since the Nalco buyout. The proposed acquisition will beef up Ecolab’s Global Energy Services franchise and expand its foothold in the North American energy market.
The transaction was expected to close by the end of 2012 but due to certain antitrust-related issues with the U.S. Department of Justice (“DOJ”), the company has extended its agreement till February 28.
Despite the impressive international exposure, we remain cautious on Ecolab owing to aggressive competition from the likes of Clorox (CLX) and Church & Dwight (CHD). We currently have a Neutral recommendation on Ecolab, which carries a short-term Zacks #4 Rank (Sell).
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