Ecolab Closes Cleantec Acquisition - Analyst Blog

Leading cleaning and sanitation products company Ecolab Inc (ECL) has completed its acquisition of Australian cleaning and hygiene products maker Cleantec for an undisclosed price. The Minneapolis-based company announced the deal in September 2010.

Cleantec, a unit of Brisbane-based diversified industrial services company Campbell Brothers Ltd, develops and markets cleaning and hygiene products primarily to the food and beverage, hospitality and textile care markets in Australia. The entity has annual sales of roughly $55 million.

The acquisition enables Ecolab to broaden its foothold in the lucrative Australian market and strengthens its Asia-Pacific operation. Besides boosting its customer base, the Cleantec acquisition will reinforce Ecolab's food and beverage and textile care businesses while expanding the market for its water care and pest elimination solutions.

Ecolab caters products and services to the hospitality, foodservice, institutional and industrial markets. It leads in cleaning, sanitizing, pest elimination and food safety solutions with revenues of $6 billion. Healthy performances across Asia-Pacific and Latin American businesses drove Ecolab's revenues and profit in third-quarter fiscal 2010. Its Asia-Pacific sales benefit from new account wins, product launches and economic growth.

To drive growth, Ecolab continues to invest in strategic areas such as, product innovation, healthcare, water and energy and global pest elimination while rationalizing operating costs. The company remains focused on bringing new technologies aimed at reducing food safety risks. Moreover, Ecolab is active on the acquisition front.

Ecolab, in September 2010, acquired the commercial laundry business of Illinois-based privately-held Dober Chemical, which has boosted its North American commercial laundry operation. Moreover, the company recently agreed to acquire Virginia-based privately-held fluid warming and cooling systems maker O.R. Solutions for $260 million in cash.

Although we are impressed by Ecolab's strong international exposure, we remain concerned about intense competition. The company's U.S. Cleaning & Sanitizing and International divisions face stiff competition from Clorox (CLX) and Church & Dwight (CHD). Moreover, Ecolab's aggressive acquisition strategy has inherent integration risks. We currently have a Neutral recommendation on Ecolab, which is supported by a Zacks #3 Rank (Hold).

 
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