UPDATE 5-Ecolab to buy energy services firm Champion for $2.2 bln

Fri Oct 12, 2012 10:11am EDT

* Ecolab to pay $1.7 bln in cash, issue 8 mln shares

* Says deal to help make up for under-investment in North America

* Acquisition to add to earnings in 2013

* Ecolab shares rise 2 percent

By Krishna N Das and Sunayan Bhattacharjee

Oct 12 (Reuters) - Cleaning services company Ecolab Inc will buy privately held oilfield specialty chemicals maker Champion Technologies Inc for about $2.2 billion to tap into rising demand for products used in oil and natural gas drilling and help to make up for under-investment in North America.

The acquisition will help Ecolab acclerate expansion of its energy services business, which makes products used to prevent corrosion in oilfield equipment and treat water for oil drillers and refiners at a time when oil output from North American shale fields is growing quickly.

"We're under-invested in North America and Champion has an investment covered in the infrastructure," Ecolab Chief Executive Douglas Baker said on a conference call.

St. Paul, Minnesota-based Ecolab, whose biggest shareholder is Microsoft founder Bill Gates's Cascade Investment LLC, will pay about $1.7 billion in cash and issue about 8 million shares to Champion. Ecolab's shares were up 2 percent at $64.93 in early trading on Friday.

Ecolab, which bought Champion competitor Nalco Holding Co last year for $5.4 billion, said the latest deal came about earlier than desired because Champion wanted to sell.

Champion is controlled by the family of the late Willard Johnson, who bought into the company in 1959.

RUNWAY OF GROWTH

"Ecolab has got their legacy in the cleaning and sanitation business, but the real growth is coming from their energy services," said Piper Jaffray analyst Mike Ritzenthaler.

"It seems to me that this acquisition leaves the groundwork for a longer runaway of growth in energy services."

The deal value looked to be on par with transactions in the specialty chemicals sector, Ritzenthaler said.

Houston-based Champion, whose competitors include Schlumberger NV, Halliburton Co and Baker Hughes Inc, had sales of $1.2 billion last year, Ecolab said.

Ecolab, which will announce its results on Oct. 30, said it expected the acquisition of Champion to close by the end of the year and add to earnings in 2013.

The company also said it estimated third-quarter adjusted earnings of 87 cents per share, which is at the high end of its July forecast.

Analysts were expecting a profit of 86 cents per share on revenue of $3.06 billion, according to Thomson Reuters I/B/E/S.

Two entities associated with Gates, Cascade and the Bill and Melinda Gates Foundation, owned 10.7 percent of Ecolab as of June 30. Ecolab said in May it would allow them to raise their combined stake to 25 percent.

Ecolab promotes its environmental credentials, saying it uses the least amount of energy and water and generates less waste in the use of its products and services for the cleaning of hotels, restaurants, food plants and oil rigs.