424B3 1 d916013d424b3.htm 424B3 424B3
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Filed pursuant to Rule 424(b)(3)
Registration No. 333-236379

 

PROSPECTUS—OFFER TO EXCHANGE

ECOLAB INC.

Offer to Exchange all Shares of Common Stock of

CHAMPIONX HOLDING INC.

Which are Owned by Ecolab Inc.

and Will Be Converted Into Shares of Common Stock of

APERGY CORPORATION

for

Outstanding Shares of Common Stock of Ecolab Inc.

 

 

Ecolab Inc. (“Ecolab”) is offering to exchange all shares of common stock, par value $0.01 per share (“ChampionX common stock”), of ChampionX Holding Inc. (“ChampionX”) owned by Ecolab for outstanding shares of common stock of Ecolab (“Ecolab common stock”) that are validly tendered and not properly withdrawn. The terms and conditions of this Exchange Offer (as defined below) are described in this prospectus, which you should read carefully. None of Ecolab, ChampionX, any of their respective directors or officers or any of their respective representatives makes any recommendation as to whether you should participate in this Exchange Offer. You must make your own decision after reading this prospectus and consulting with your advisors. This Exchange Offer is voluntary. If you would like to keep all of your shares of Ecolab common stock, you do not need to take any action.

Ecolab’s obligation to exchange shares of ChampionX common stock for shares of Ecolab common stock is subject to the satisfaction of certain conditions, including conditions to the consummation of the Transactions (as defined below), which include approval by the stockholders of Apergy Corporation (“Apergy”) of the issuance of shares of common stock of Apergy (“Apergy common stock”) in the Merger (as defined below).

The transactions contemplated by the Merger Agreement (as further described in “The Transaction Agreements—The Merger Agreement”) and the Separation Agreement (as further described in “The Transaction Agreements—The Separation Agreement”), referred to in this prospectus collectively as the Transactions, are being undertaken to transfer the ChampionX Business (as defined below) from Ecolab to Apergy. The aggregate value of the consideration to be paid to Ecolab stockholders with respect to the ChampionX Business in the Transactions is estimated, as of April 24, 2020, to be approximately $1.02 billion in value of Apergy common stock (calculated based on the closing price on the New York Stock Exchange (the “NYSE”) of Apergy common stock as of April 24, 2020) issuable to Ecolab stockholders that participate in this Exchange Offer.

Immediately following the consummation of this Exchange Offer, Athena Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Apergy (“Merger Sub”), will be merged with and into ChampionX, whereby the separate corporate existence of Merger Sub will cease and ChampionX will continue as the surviving corporation and a wholly owned subsidiary of Apergy (the “Merger”). In the Merger, each outstanding share of ChampionX common stock (except for shares of ChampionX common stock held by ChampionX, which shares will be canceled and cease to exist, and no consideration will be delivered in exchange therefor) will be converted into the right to receive a number of duly authorized, validly issued, fully paid and nonassessable shares of Apergy common stock equal to the Merger Exchange Ratio (as defined in “The Transactions—The Merger—Calculation of the Merger Consideration”). In addition, ChampionX will authorize the issuance of a number of shares of ChampionX common stock such that the total number of shares of ChampionX common stock outstanding immediately prior to the Distribution (as defined below) will be that number that results in the Merger Exchange Ratio equaling one. As a result, each share of ChampionX


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common stock (except for shares of ChampionX common stock held by ChampionX, which shares will be canceled and cease to exist, and no consideration will be delivered in exchange therefor) will be converted into one share of Apergy common stock in the Merger. The aggregate number of shares of Apergy common stock to be issued in the Merger by Apergy is expected to result in pre-Merger holders of shares of ChampionX common stock and ChampionX employees collectively owning approximately 62% of the issued and outstanding shares of Apergy common stock on a fully-diluted basis after giving effect to the Merger and pre-Merger holders of Apergy common stock or equity-based awards of Apergy owning approximately 38% of the issued and outstanding shares of Apergy common stock on a fully-diluted basis. ChampionX common stock will not be transferred to participants in this Exchange Offer; such participants will instead receive shares of Apergy common stock in the Merger. No trading market currently exists for ChampionX common stock. You will not be able to trade shares of ChampionX common stock before they are converted into shares of Apergy common stock in the Merger. In addition, there can be no assurance that shares of Apergy common stock, when issued in the Merger, will trade at the same prices at which shares of Apergy common stock traded prior to the Merger.

The value of Ecolab common stock and ChampionX common stock for purposes of establishing the exchange ratio for this Exchange Offer will be determined by Ecolab by reference to the simple arithmetic average of the daily volume-weighted average prices (“VWAP”) on each of the Valuation Dates (as defined below) of Ecolab common stock and Apergy common stock on the NYSE. The “Valuation Dates” will be the last three full trading days ending on and including the third trading day preceding the expiration date of this Exchange Offer, as it may be voluntarily extended. Based on an expiration date of June 3, 2020, the Valuation Dates are expected to be May 27, 2020, May 28, 2020 and May 29, 2020. See “Exchange Offer—Terms of This Exchange Offer.”

This Exchange Offer is designed to permit you to exchange your shares of Ecolab common stock for shares of ChampionX common stock at a 10% discount to the per-share value of Apergy common stock, calculated as set forth in this prospectus, subject to the upper limit described below. For each $100 of your Ecolab common stock accepted for exchange in this Exchange Offer, you will receive approximately $111.11 of ChampionX common stock, subject to an upper limit of 24.6667 shares of ChampionX common stock per share of Ecolab common stock. This Exchange Offer does not provide for a minimum exchange ratio. See “Exchange Offer—Terms of This Exchange Offer.” If the upper limit is in effect, then the exchange ratio will be fixed at that limit. IF THE UPPER LIMIT IS IN EFFECT, AND UNLESS YOU PROPERLY WITHDRAW YOUR SHARES, YOU WILL RECEIVE LESS (AND YOU COULD RECEIVE MUCH LESS) THAN $111.11 OF CHAMPIONX COMMON STOCK FOR EACH $100 OF ECOLAB COMMON STOCK THAT YOU TENDER.

The indicative exchange ratio that would have been in effect following the official close of trading on the NYSE on April 29, 2020 (the second to last trading day before the date of this prospectus), based on the daily VWAPs of Ecolab common stock and Apergy common stock on April 27, 2020, April 28, 2020 and April 29, 2020, would have provided for 21.6285 shares of ChampionX common stock to be exchanged for every share of Ecolab common stock accepted for exchange. The value of ChampionX common stock issued and, following the Merger, the value of Apergy common stock received may not remain above the value of Ecolab common stock tendered following the expiration of this Exchange Offer.

THIS EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:01 A.M., NEW YORK CITY TIME, ON JUNE 3, 2020, UNLESS THIS EXCHANGE OFFER IS EXTENDED OR TERMINATED. SHARES OF ECOLAB COMMON STOCK TENDERED PURSUANT TO THIS EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF THIS EXCHANGE OFFER.

 

 

In reviewing this prospectus, you should carefully consider the risk factors beginning on page 41 of this prospectus.

We Are Not Asking You for a Proxy and You are Requested Not To Send Us a Proxy.


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Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities regulator has approved or disapproved of the securities described in this prospectus or determined if this prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

The date of this prospectus is May 1, 2020.

The final exchange ratio used to determine the number of shares of ChampionX common stock that you will receive for each share of your Ecolab common stock accepted for exchange in this Exchange Offer will be announced by press release no later than 9:00 a.m., New York City time, on the second to last full trading day prior to the expiration date. At such time, the final exchange ratio will be available at www.championxexchangeoffer.com and from the information agent for this Exchange Offer at the toll-free number provided on the back cover of this prospectus. Ecolab will announce whether the upper limit on the number of shares that can be received for each share of Ecolab common stock tendered and accepted for exchange will be in effect, through www.championxexchangeoffer.com and by press release, no later than 9:00 a.m., New York City time, on the second to last full trading day prior to the expiration date. Commencing after the close of trading on the third trading day of this Exchange Offer, indicative exchange ratios (calculated in the manner described in this prospectus) will also be available on that website and from the information agent at the toll-free number provided on the back cover of this prospectus.

This prospectus provides information regarding Ecolab, ChampionX, Apergy, this Exchange Offer and the Merger. Ecolab common stock is listed on the NYSE under the symbol “ECL.” Apergy common stock is listed on the NYSE under the symbol “APY.” On April 29, 2020, the last reported sale price of Ecolab common stock on the NYSE was $197.58 per share, and the last reported sale price of Apergy common stock on the NYSE was $10.68 per share. The market prices of Ecolab common stock and of Apergy common stock will fluctuate prior to the completion of this Exchange Offer and thereafter and may be higher or lower at the expiration date of this Exchange Offer than the prices set forth above. No trading market currently exists for ChampionX common stock. ChampionX has not applied for listing of ChampionX common stock on any exchange.

If this Exchange Offer is consummated but is not fully subscribed because less than all the shares of ChampionX common stock owned by Ecolab are exchanged the remaining shares of ChampionX common stock owned by Ecolab will be distributed to Ecolab stockholders whose shares of Ecolab common stock remain outstanding after the consummation of this Exchange Offer pursuant to a pro rata distribution (a “clean-up spin-off”). Any Ecolab stockholder who validly tenders (and does not properly withdraw) shares of Ecolab common stock that are accepted for exchange in this Exchange Offer will with respect to such shares waive their rights to receive, and forfeit any rights to, shares of ChampionX common stock distributed in the clean-up spin-off. This prospectus covers all shares of ChampionX common stock offered by Ecolab in this Exchange Offer and all shares of ChampionX common stock that may be distributed by Ecolab in a spin-off (including the clean-up spin-off) to holders of shares of Ecolab common stock. If this Exchange Offer is terminated by Ecolab without the exchange of shares (but the conditions to consummation of the Transactions have otherwise been satisfied), Ecolab intends to distribute all shares of ChampionX common stock owned by Ecolab on a pro rata basis to holders of Ecolab common stock, with a record date to be announced by Ecolab. See “Exchange Offer—Distribution of ChampionX Common Stock Remaining After This Exchange Offer.”

Following the consummation of this Exchange Offer, in the Merger, Merger Sub will be merged with and into ChampionX, whereby the separate corporate existence of Merger Sub will cease and ChampionX will continue as the surviving corporation and a wholly owned subsidiary of Apergy. In the Merger, each outstanding share of ChampionX common stock (except for shares of ChampionX common stock held by ChampionX, which shares will be canceled and cease to exist, and no consideration will be delivered in exchange therefor) will be converted into the right to receive a number of duly authorized, validly issued, fully paid and nonassessable shares of Apergy common stock equal to the Merger Exchange Ratio. ChampionX will authorize the issuance of a number of shares of ChampionX common stock such that the total number of shares of ChampionX common stock outstanding immediately prior to the Distribution will be that number that results in the Merger Exchange Ratio equaling one. As a result, each share of ChampionX common stock (except for shares of ChampionX common stock held by ChampionX, which shares will be canceled and cease to exist, and no consideration will be delivered in exchange therefor) will be converted into one share of Apergy common stock in the Merger. Ecolab currently expects that approximately 122.0 million shares of ChampionX common stock will be available in this Exchange Offer.

Ecolab’s obligation to exchange shares of ChampionX common stock for Apergy common stock is subject to the conditions listed under “Exchange Offer—Conditions to Consummation of This Exchange Offer,” including the satisfaction of conditions to the Merger, which include Apergy stockholder approval of the issuance of Apergy common stock in connection with the Merger, and other conditions.


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TABLE OF CONTENTS

 

SELECTED DEFINITIONS

     1  

QUESTIONS AND ANSWERS ABOUT THIS EXCHANGE OFFER AND THE TRANSACTIONS

     3  

Questions and Answers about this Exchange Offer

     3  

Questions and Answers about the Transactions

     12  

SUMMARY

     20  

The Companies

     20  

The Transactions

     21  

Overview

     22  

The Separation and the Distribution

     24  

The Merger

     25  

Terms of This Exchange Offer

     25  

Debt Financing

     31  

Board of Directors and Management of Apergy After the Merger

     31  

Interests of Certain Persons in the Transactions

     31  

Apergy’s Stockholders Meeting

     32  

Accounting Treatment of the Merger

     32  

U.S. Federal Income Tax Consequences of the Distribution and the Merger

     33  

Regulatory Approvals

     33  

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

     34  

Summary Historical Combined Financial Information of ChampionX

     34  

Summary Historical Consolidated Financial Information of Ecolab

     35  

Summary Historical Consolidated Financial Information of Apergy

     36  

Summary Unaudited Pro Forma Condensed Consolidated Financial Information of Ecolab

     37  

Summary Unaudited Pro Forma Combined Financial Information of Apergy

     38  

Comparison of Market Prices

     40  

RISK FACTORS

     41  

Risks Related to the Transactions

     41  

Risks Related to this Exchange Offer

     49  

Risks Related to the Combined Company’s Business Following the Transactions

     51  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     66  

EXCHANGE OFFER

     68  

Terms of This Exchange Offer

     68  

Conditions to Consummation of This Exchange Offer

     81  

Fees and Expenses

     83  

Legal Limitations

     83  

Certain Matters Relating to Non-U.S. Jurisdictions

     83  

Distribution of ChampionX Common Stock Remaining After This Exchange Offer

     84  

INFORMATION ABOUT APERGY AND MERGER SUB

     85  

Information about Apergy

     85  

Information About Merger Sub

     86  

INFORMATION ABOUT ECOLAB

     87  

INFORMATION ABOUT THE CHAMPIONX BUSINESS

     88  

Company Overview

     88  

History and Development

     89  

Industry and Market Conditions

     89  

Business Segments

     90  

ChampionX’s Competitive Strengths

     92  

ChampionX’s Business Strategies

     93  

Competition

     94  

 

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Customers, Sales and Distribution

     95  

Working Capital

     95  

Investments in Equipment

     95  

Manufacturing

     96  

Joint Ventures

     96  

Intellectual Property

     96  

Research and Development

     97  

Raw Materials

     97  

Environmental and Regulatory Considerations

     97  

Employees

     100  

Properties

     100  

Legal Proceedings

     101  

HISTORICAL AND PRO FORMA PER SHARE INFORMATION, MARKET PRICE AND DIVIDEND INFORMATION

     104  

Historical and Pro Forma Per Share Information

     104  

Certain Market Price and Dividend Information

     105  

Apergy Dividend Policy

     105  

Ecolab Dividend Policy

     106  

SELECTED HISTORICAL COMBINED FINANCIAL INFORMATION OF CHAMPIONX

     107  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF ECOLAB

     109  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF APERGY

     111  

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF ECOLAB

     112  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF APERGY

     118  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CHAMPIONX

     129  

THE TRANSACTIONS

     150  

General

     150  

Transaction Sequence

     151  

The Separation and the Distribution

     153  

The Merger

     154  

Background of the Transactions

     155  

Apergy’s Reasons for the Transactions

     162  

Ecolab’s Reasons for the Transactions

     164  

Opinion of Apergy’s Financial Advisors

     166  

Certain Projections

     179  

Ownership of Apergy Following the Merger

     184  

Board of Directors and Executive Officers of Apergy Following the Merger; Operations Following the Merger

     184  

Interests of Certain Persons in the Transactions

     185  

Effects of the Distribution and the Merger on Ecolab Equity Awards Held by ChampionX Employees

     190  

Apergy’s Stockholders Meeting

     190  

Accounting Treatment of the Merger

     191  

Regulatory Approvals

     191  

Federal Securities Law Consequences; Resale Restrictions

     192  

Rights of Appraisal

     192  

Listing

     192  

THE TRANSACTION AGREEMENTS

     193  

The Merger Agreement

     193  

The Separation Agreement

     210  

 

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ADDITIONAL AGREEMENTS RELATED TO THE SEPARATION, THE DISTRIBUTION AND THE MERGER

     217  

Apergy Credit Facility

     217  

ChampionX Credit Facility

     217  

Employee Matters Agreement

     218  

Tax Matters Agreement

     223  

Intellectual Property Matters Agreement

     225  

Transition Services Agreement

     226  

Other Agreements

     226  

DESCRIPTION OF CAPITAL STOCK OF APERGY BEFORE AND AFTER THE MERGER

     227  

Description of Capital Stock of Apergy

     227  

Anti-Takeover Effects of Apergy’s Amended and Restated Certificate of Incorporation and Amended and Restated By-laws and Delaware Law

     228  

Limitation of Liability of Directors; Indemnification of Directors

     231  

Exclusive Forum

     231  

Authorized but Unissued Shares

     232  

Transfer Agent and Registrar

     232  

DESCRIPTION OF CHAMPIONX CAPITAL STOCK

     233  

ChampionX Common Stock

     233  

ChampionX Certificate and Incorporation and Bylaws

     234  

COMPARISON OF THE RIGHTS OF STOCKHOLDERS BEFORE AND AFTER THE TRANSACTIONS

     236  

U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION AND THE MERGER

     247  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE OFFICERS OF APERGY

     252  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE OFFICERS OF ECOLAB

     254  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     257  

LEGAL MATTERS

     257  

EXPERTS

     257  

WHERE YOU CAN FIND ADDITIONAL INFORMATION; INCORPORATION BY REFERENCE

     258  

INDEX TO FINANCIAL STATEMENTS

     F-1  

ANNEXES

Annex A – Opinion of Centerview Partners LLC

Annex B – Opinion of Lazard Frères & Co. LLC

This prospectus incorporates by reference important business and financial information about Ecolab and Apergy from documents filed with the SEC that have not been included in or delivered with this prospectus and have not been incorporated by reference unless explicitly stated. This information is available without charge at the website that the SEC maintains at www.sec.gov, as well as from other sources. See “Where You Can Find Additional Information; Incorporation by Reference.” You also may ask any questions about this Exchange Offer or request copies of the Exchange Offer documents and the other information incorporated by reference in this prospectus, without charge, upon written or oral request to Ecolab’s information agent, Georgeson, located at 1290 Avenue of the Americas, 9th Floor, New York, NY 10104 or at the telephone number 866-857-2624. In order to receive timely delivery of the documents, you must make your requests no later than May 26, 2020.

If you participate in the Ecolab stock fund through the Ecolab Savings Plans, you may ask questions about this Exchange Offer with respect to the plans, without charge, upon written or oral request to the trustee of the trust established under the plans, Fidelity Management Trust Company, located at 245 Summer Street, Boston, MA 02109 or at the telephone number 800-835-5091.

 

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All information contained or incorporated by reference in this prospectus with respect to Apergy, Merger Sub and their respective subsidiaries, as well as information on Apergy after the consummation of the Transactions, has been provided by Apergy. All other information contained or incorporated by reference in this prospectus with respect to Ecolab, ChampionX or their respective subsidiaries, and with respect to the terms and conditions of this Exchange Offer, has been provided by Ecolab.

This prospectus is not an offer to exchange and it is not a solicitation of an offer to buy any shares of Ecolab common stock, Champion common stock or Apergy common stock in any jurisdiction in which the offer, sale or exchange is not permitted. Non-U.S. stockholders should consult their advisors in considering whether they may participate in this Exchange Offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of ChampionX common stock that may apply in their home countries. Ecolab, ChampionX and Apergy cannot provide any assurance about whether such limitations may exist. See “Exchange Offer—Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on this Exchange Offer outside the United States.

 

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SELECTED DEFINITIONS

Certain abbreviations and terms used in the text and notes are defined as follows:

 

Abbreviation/Term

  

Definition

Apergy

   Apergy Corporation

Apergy common stock

   The common stock, par value $0.01 per share, of Apergy

Apergy equityholders

   Pre-Merger holders of Apergy common stock or equity-based awards of Apergy

ChampionX

   ChampionX Holding Inc., currently a wholly owned subsidiary of Ecolab

ChampionX Business

   Ecolab’s upstream energy business

ChampionX common stock

   The common stock, par value $0.01 per share, of ChampionX

ChampionX equityholders

   Pre-Merger holders of shares of ChampionX common stock and ChampionX Employees (as defined in “Additional Agreements Related to the Separation, the Distribution and the Merger — Employee Matters Agreement — Transfer of ChampionX and Ecolab Employees and Independent Contractors and Liability for Related Costs”)

clean-up spin-off

   The distribution by Ecolab following the consummation of this Exchange Offer, if this Exchange Offer is not fully subscribed, of the remaining shares of ChampionX common stock owned by Ecolab on a pro rata basis to Ecolab stockholders whose shares of Ecolab common stock remain outstanding after consummation of this Exchange Offer

Contribution

   The transfer of assets from Ecolab to ChampionX and the assumption of liabilities by ChampionX from Ecolab pursuant to the Internal Restructuring (as defined in and contemplated by the Separation Agreement) or otherwise arising out of or resulting from the transactions contemplated by the Separation Agreement

Distribution

   The distribution by Ecolab, pursuant to the Separation Agreement, of (i) up to 100% of the shares of ChampionX common stock to Ecolab’s stockholders in this Exchange Offer followed, if necessary, by the clean-up spin-off or (ii) if this Exchange Offer is terminated, all of the outstanding shares of ChampionX common stock to Ecolab stockholders on a pro rata basis

Ecolab

   Ecolab Inc.

 

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Abbreviation/Term

  

Definition

Ecolab common stock

   The common stock, par value $1.00 per share, of Ecolab

Ecolab Savings Plans

   The Ecolab Savings Plan and ESOP, the Ecolab Savings Plan and ESOP for Traditional Benefit Employees, and the Ecolab Puerto Rico Savings Plan

Exchange Offer

   The exchange offer to which this prospectus relates, whereby Ecolab is offering to its stockholders the ability to exchange all or a portion of their shares of Ecolab common stock for shares of ChampionX common stock, which shares of ChampionX common stock will be immediately exchanged for Apergy common stock in the Merger

Merger

   The merger of Merger Sub with and into ChampionX, with ChampionX surviving the merger as a wholly owned subsidiary of Apergy, as contemplated by the Merger Agreement

Merger Agreement

   The Agreement and Plan of Merger and Reorganization, dated as of December 18, 2019, by and among Ecolab, Apergy, ChampionX and Merger Sub (as it may be amended from time to time)

Merger Sub

   Athena Merger Sub, Inc., a wholly owned subsidiary of Apergy

NYSE

   The New York Stock Exchange

Separation Agreement

   The Separation and Distribution Agreement, dated as of December 18, 2019, by and among Ecolab, ChampionX and Apergy (as it may be amended from time to time)

Share Issuance

   The issuance of Apergy common stock in connection with the Merger

Share Issuance Proposal

   The proposal to approve the Share Issuance

Transactions

   The transactions contemplated by the Merger Agreement and the Separation Agreement

Valuation Dates

   The last three full trading days ending on and including the third trading day preceding the expiration date of this Exchange Offer, as it may be voluntarily extended

VWAP

   Volume-weighted average price

 

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QUESTIONS AND ANSWERS ABOUT THIS EXCHANGE OFFER AND THE TRANSACTIONS

The following are brief answers to some of the common questions that stockholders of Ecolab may have regarding the transactions contemplated by the Merger Agreement and the Separation Agreement, which provide for, among other things, the Separation, the Distribution and the Merger. For more detailed information about the matters discussed in these questions and answers, see “The Transactions” beginning on page 150 and “The Transaction Agreements” beginning on page 193. These questions and answers are not meant to be a substitute for the information contained in the remainder of this prospectus, and this information is qualified in its entirety by the more detailed descriptions and explanations contained elsewhere in this prospectus. Stockholders of Ecolab are urged to read this prospectus in its entirety prior to making any decision. You should pay special attention to the “Risk Factors” beginning on page 41 and “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 66.

Questions and Answers about this Exchange Offer

 

Q:

Who may participate in this Exchange Offer?

 

A:

Any U.S. holders of Ecolab common stock during the period this Exchange Offer is open may participate in this Exchange Offer. This includes shares of Ecolab common stock (or units in respect of shares of Ecolab common stock) held for the account of participants in the Ecolab Savings Plans and the Ecolab Stock Purchase Plan. Although Ecolab has mailed this prospectus to its stockholders to the extent required by U.S. law, including stockholders located outside the United States, this prospectus is not an offer to buy, sell or exchange and it is not a solicitation of an offer to buy or sell any shares of Ecolab common stock, shares of Apergy common stock or shares of ChampionX common stock in any jurisdiction in which such offer, sale or exchange is not permitted. Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. None of Ecolab, Apergy or ChampionX has taken any action under non-U.S. regulations to facilitate a public offer to exchange the shares of Ecolab common stock, shares of Apergy common stock or shares of ChampionX common stock outside the United States. Accordingly, the ability of any non-U.S. person to tender shares of Ecolab common stock in this Exchange Offer will depend on whether there is an exemption available under the laws of such person’s home country that would permit the person to participate in this Exchange Offer without the need for Ecolab, Apergy or ChampionX to take any action to facilitate a public offering in that country or otherwise. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors.

The legal limitations described above could prevent certain holders of Ecolab common stock from participating in this Exchange Offer, which could cause this Exchange Offer to be undersubscribed.

Non-U.S. stockholders should consult their advisors in considering whether they may participate in this Exchange Offer in accordance with the laws of their home countries and, if they participate, whether there are any restrictions or limitations on transactions in the shares of Ecolab common stock, shares of ChampionX common stock or shares of Apergy common stock that may apply in their home countries. None of Ecolab, Apergy or ChampionX can provide any assurance about whether such limitations may exist. See “Exchange Offer—Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on this Exchange Offer outside the United States.

All holders who are tendering shares of Ecolab common stock (or units in respect of shares of Ecolab common stock) allocated to their Ecolab Savings Plans accounts or Ecolab Stock Purchase Plan accounts should follow the special instructions provided to them by or on behalf of their applicable plan administrator. Such participants may direct the applicable plan trustee or agent to tender all, some or none of the shares of Ecolab common stock (or units in respect of shares of Ecolab common stock) allocated to their Ecolab Savings Plans accounts or Ecolab Stock Purchase Plan accounts, subject to certain limitations. To allow sufficient time for the tender of shares of Ecolab common stock (or units in respect of shares of

 

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Ecolab common stock) by the trustee of the applicable Ecolab Savings Plans or the agent of the Ecolab Stock Purchase Plan, tendering holders must provide the tabulator for the Ecolab Savings Plans or the agent for the Ecolab Stock Purchase Plan with the requisite instructions by the deadline specified in the special instructions provided to them, unless this Exchange Offer is extended. If this Exchange Offer is extended, and if administratively feasible, the deadline for receipt of the holder’s direction also may be extended.

 

Q:

How many shares of ChampionX common stock will I receive for each share of Ecolab common stock that I tender?

 

A:

This Exchange Offer is designed to permit you to exchange your shares of Ecolab common stock for shares of ChampionX common stock at a price per share equal to a 10% discount to the per-share value of Apergy common stock, calculated as set forth in this prospectus. Stated another way, for each $100 of your Ecolab common stock accepted for exchange in this Exchange Offer, you will receive approximately $111.11 of ChampionX common stock. The value of the Ecolab common stock will be based on the calculated per-share value for the Ecolab common stock on the NYSE and the value of the ChampionX common stock will be based on the calculated per-share value for Apergy common stock on the NYSE, in each case determined by reference to the simple arithmetic average of the daily VWAP on each of the Valuation Dates. Please note, however, that:

 

   

The number of shares you can receive in this Exchange Offer is subject to an upper limit of 24.6667 shares of ChampionX common stock for each share of Ecolab common stock accepted for exchange in this Exchange Offer. The next question and answer below describes how this limit may impact the value you receive.

 

   

This Exchange Offer does not provide for a minimum exchange ratio. See “Exchange Offer—Terms of This Exchange Offer.”

 

   

Because this Exchange Offer is subject to proration, Ecolab may accept for exchange only a portion of the Ecolab common stock tendered by you.

 

Q:

Is there a limit on the number of shares of ChampionX common stock I can receive for each share of Ecolab common stock that I tender?

 

A:

The number of shares you can receive in this Exchange Offer is subject to an upper limit of 24.6667 shares of ChampionX common stock for each share of Ecolab common stock accepted for exchange in this Exchange Offer. If the upper limit is in effect, you will receive less (and could receive much less) than $111.11 of ChampionX common stock for each $100 of Ecolab common stock that you tender. For example, if the calculated per-share value of Ecolab common stock was $210.31 (the highest closing price for Ecolab common stock on the NYSE during the three-month period ending on the second to last full trading day prior to commencement of this Exchange Offer) and the calculated per-share value of ChampionX common stock was $3.02 (the lowest closing price for Apergy common stock on the NYSE during that three-month period), the value of ChampionX common stock, based on the Apergy common stock price, received for shares of Ecolab common stock accepted for exchange would be approximately $35 for each $100 of Ecolab common stock accepted for exchange.

The upper limit would represent a 21% discount for ChampionX common stock based on the average of the daily VWAPs of Ecolab common stock and Apergy common stock on the NYSE on April 27, 2020, April 28, 2020, and April 29, 2020 (the last three full trading days ending on the second to last full trading day prior to commencement of this Exchange Offer). Ecolab set this upper limit to ensure that an unusual or unexpected drop in the trading price of Apergy common stock, relative to the trading price of Ecolab common stock, would not result in an unduly high number of shares of ChampionX common stock being exchanged for each share of Ecolab common stock accepted for exchange in this Exchange Offer.

 

Q:

How and when will I know if the upper limit is in effect?

 

A:

Ecolab will announce whether the upper limit on the number of shares that can be received for each share of Ecolab common stock tendered and accepted for exchange will be in effect at the expiration of this

 

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  Exchange Offer, through www.championxexchangeoffer.com and by press release, no later than 9:00 a.m., New York City time, on the second trading day prior to the expiration date. If the upper limit is in effect at that time, then the exchange ratio will be fixed at the upper limit.

 

Q:

How are the calculated per-share values of Ecolab common stock and Apergy common stock determined for purposes of calculating the number of shares of ChampionX common stock to be received in this Exchange Offer?

 

A:

The calculated per-share value of Ecolab common stock and Apergy common stock for purposes of this Exchange Offer will equal the simple arithmetic average of the daily VWAP of Ecolab common stock and Apergy common stock on the NYSE on each of the Valuation Dates. Ecolab will determine such calculations of the per-share values of Ecolab common stock and Apergy common stock and such determination will be final.

 

Q:

What is the “daily volume-weighted average price” or “daily VWAP”?

 

A:

The “daily volume-weighted average price” for Ecolab common stock will be the volume-weighted average price of Ecolab common stock on the NYSE and the “daily volume-weighted average price” for Apergy common stock will be the volume-weighted average price of Apergy common stock on the NYSE, in each case during the period beginning at 9:30 a.m., New York City time (or such other time as is the official open of trading on the NYSE), and ending at 4:00 p.m., New York City time (or such other time as is the official close of trading on the NYSE), except that such data will only take into account adjustments made to reported trades included by 4:10 p.m., New York City time. The daily VWAP will be as reported to Ecolab by Bloomberg L.P. through the Price and Volume Dashboard for “ECL,” in the case of Ecolab common stock, and “APY,” in the case of Apergy common stock. The daily VWAPs provided by Bloomberg L.P. may be different from other sources of volume–weighted average prices or investors’ or security holders’ own calculations of volume–weighted average prices.

 

Q:

Where can I find the daily VWAP of Ecolab common stock and Apergy common stock during the period this Exchange Offer is open?

 

A:

Ecolab will maintain a website at www.championxexchangeoffer.com that provides the daily VWAP of both Ecolab common stock and Apergy common stock for each day during this Exchange Offer. Commencing after the close of trading on the third trading day of this Exchange Offer and on each subsequent day during this Exchange Offer, the website will provide indicative exchange ratios, calculated, prior to any Valuation Date, as though that day were the expiration date of this Exchange Offer. On the first two Valuation Dates, when the values of Ecolab common stock and Apergy common stock are calculated for the purposes of this Exchange Offer, the website will show the indicative exchange ratios based on indicative calculated per-share values calculated by Ecolab, which will equal (i) after the close of trading on the NYSE on the first Valuation Date, the VWAPs for that day, and (ii) after the close of trading on the NYSE on the second Valuation Date, the VWAPs for that day averaged with the VWAPs on the first Valuation Date. On the first two Valuation Dates, the indicative exchange ratios will be updated no later than 4:30 p.m., New York City time. No indicative exchange ratio will be published or announced on the third Valuation Date, but the final exchange ratio will be announced by press release and available on the website by 9:00 a.m. New York City time on the second trading day immediately preceding the expiration date of this Exchange Offer.

 

Q:

Why is the calculated per-share value for ChampionX common stock based on the trading prices for Apergy common stock?

 

A:

There is currently no trading market for ChampionX common stock. Ecolab believes, however, that the trading prices for Apergy common stock are an appropriate proxy for the trading prices of ChampionX common stock because (i) in the Merger, each outstanding share of ChampionX common stock (except for shares of ChampionX common stock held by ChampionX, which shares will be canceled and cease to exist, and no consideration will be delivered in exchange therefor) will be converted into the right to receive a

 

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  number of duly authorized, validly issued, fully paid and nonassessable shares of Apergy common stock equal to the Merger Exchange Ratio, which is calculated under the Merger Agreement such that immediately following the Merger, ChampionX equityholders will own, in the aggregate, approximately 62% of the issued and outstanding Apergy common stock on a fully diluted basis and Apergy equityholders will own, in the aggregate, approximately 38% of the issued and outstanding Apergy common stock on a fully diluted basis, (ii) prior to the consummation of this Exchange Offer, ChampionX will authorize the issuance of a number of shares of ChampionX common stock such that the total number of shares of ChampionX common stock outstanding immediately prior to the Distribution will be that number that results in the Merger Exchange Ratio equaling one and, as a result, each share of ChampionX common stock (except for shares of ChampionX common stock held by ChampionX, which shares will be canceled and cease to exist, and no consideration will be delivered in exchange therefor) will be converted into one share of Apergy common stock in the Merger, and (iii) at the Valuation Dates, it is expected that all the major conditions to the consummation of the Merger will have been satisfied or waived and the Merger will be expected to be consummated shortly, such that investors should be expected to be valuing Apergy common stock based on the expected value of such Apergy common stock immediately after the Merger. There can be no assurance, however, that Apergy common stock after the Merger will trade on the same basis or same level as Apergy common stock trades prior to the Merger. See “Risk Factors—Risks Related to the Transactions—The trading prices of Apergy common stock may not be an appropriate proxy for the prices of ChampionX common stock.”

 

Q:

How and when will I know the final exchange ratio?

 

A:

The final exchange ratio showing the number of shares of ChampionX common stock that you will receive for each share of your Ecolab common stock accepted for exchange in this Exchange Offer will be available at www.championxexchangeoffer.com no later than 9:00 a.m., New York City time, on the second to last full trading day prior to the expiration date and separately announced by press release. In addition, as described below, you may also contact the information agent to obtain these indicative exchange ratios and the final exchange ratio at its toll-free number provided on the back cover of this prospectus. Ecolab will announce whether the upper limit on the number of shares that can be received for each share of Ecolab common stock tendered and accepted for exchange is in effect at www.championxexchangeoffer.com and separately by press release, no later than 9:00 a.m., New York City time, on the second to last full trading day prior to the expiration date. If the upper limit is in effect at that time, then the exchange ratio will be fixed at the upper limit.

 

Q:

Will indicative exchange ratios be provided during this Exchange Offer?

 

A:

Yes. Indicative exchange ratios will be available commencing after the close of trading on the third trading day of this Exchange Offer by contacting the information agent at the toll-free number provided on the back cover of this prospectus and at www.championxexchangeoffer.com on each full trading day during this Exchange Offer, calculated, prior to any Valuation Date, as though that day were the expiration date of this Exchange Offer. The indicative exchange ratio will also reflect whether the upper limit on the exchange ratio, described above, would have been in effect. On the first two Valuation Dates, when the per-share values of Ecolab common stock and per-share values of ChampionX common stock are calculated for the purposes of this Exchange Offer, the website will show the indicative exchange ratios based on indicative calculated per-share values which will equal (i) after the close of trading on the NYSE on the first Valuation Date, the VWAPs for that day, and (ii) after the close of trading on the NYSE on the second Valuation Date, the VWAPs for that day averaged with the VWAPs on the first Valuation Date. On the first two Valuation Dates, the indicative exchange ratios will be updated no later than 4:30 p.m., New York City time. No indicative exchange ratio will be published or announced on the third Valuation Date, but the final exchange ratio will be announced by press release and available on the website by 9:00 a.m. New York City time on the second trading day immediately preceding the expiration date of this Exchange Offer.

In addition, for purposes of illustration, a table that indicates the number of shares of ChampionX common stock that you would receive per share of Ecolab common stock, calculated on the basis described above

 

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and taking into account the upper limit, assuming a range of averages of the daily VWAP of Ecolab common stock and Apergy common stock on the Valuation Dates, is provided in “Exchange Offer—Terms of This Exchange Offer.”

 

Q:

What if Ecolab common stock or Apergy common stock does not trade on any of the Valuation Dates?

 

A:

If a market disruption event, as defined below, occurs with respect to Ecolab common stock or Apergy common stock on any of the Valuation Dates, the calculated per-share value of Ecolab common stock and per-share value of ChampionX common stock will be determined using the daily VWAP of shares of Ecolab common stock and shares of Apergy common stock on the preceding full trading day or days, as the case may be, on which no market disruption event occurred with respect to either Ecolab common stock and Apergy common stock. If, however, a market disruption event occurs as specified above, Ecolab may terminate or extend this Exchange Offer if, in its reasonable judgment, the market disruption event has impaired the benefits of this Exchange Offer to Ecolab. For specific information as to what would constitute a market disruption event, see “Exchange Offer—Conditions to Consummation of This Exchange Offer.”

 

Q:

Are there circumstances under which I would receive fewer shares of ChampionX common stock than I would have received if the exchange ratio were determined using the closing prices of Ecolab common stock and Apergy common stock on the expiration date of this Exchange Offer?

 

A:

Yes. For example, if the trading price of Ecolab common stock were to increase after the exchange ratio is set, the calculated per-share value of Ecolab common stock would likely be lower than the closing price of Ecolab common stock on the expiration date of this Exchange Offer. As a result, you may receive fewer shares of ChampionX common stock for each $100 of Ecolab common stock than you would otherwise receive if that per-share value were calculated on the basis of the closing price of Ecolab common stock on the expiration date of this Exchange Offer. Similarly, if the trading price of Apergy common stock were to decrease after the exchange ratio is set, the calculated per-share value of ChampionX common stock would likely be higher than the closing price of Apergy common stock on the expiration date. This could also result in you receiving fewer shares of ChampionX common stock for each $100 of Ecolab common stock than you would otherwise receive if that per-share value were calculated on the basis of the closing price of Apergy common stock on the expiration date of this Exchange Offer. See “Exchange Offer—Terms of This Exchange Offer.”

 

Q:

Will fractional shares of ChampionX common stock and fractional shares of Apergy common stock be distributed?

 

A:

Fractional shares of ChampionX common stock will be issued in the Distribution. The shares of ChampionX common stock (including the fractional shares) will be held by the Exchange Offer agent for the benefit of Ecolab stockholders whose shares of Ecolab common stock are accepted for exchange in this Exchange Offer and, if this Exchange Offer is completed but not fully subscribed, for distribution in the clean-up spin-off. If this Exchange Offer is terminated by Ecolab without the exchange of shares (but the conditions to consummation of the Transactions have otherwise been satisfied), Ecolab intends to distribute all shares (including fractional shares) of ChampionX common stock owned by Ecolab on a pro rata basis to holders of Ecolab common stock, with a record date to be announced by Ecolab. However, in the Merger, no fractional shares of Apergy common stock will be delivered to holders of shares of ChampionX common stock. Instead, holders of shares of ChampionX common stock who would otherwise be entitled to receive a fractional share of Apergy common stock (after aggregating all fractional shares of Apergy common stock issuable to such holder) will receive in cash the dollar amount (rounded to the nearest whole cent) determined by multiplying such fraction by the closing price of Apergy common stock on the NYSE on the last business day prior to the effective time of the Merger. The amount received by such holders of shares of ChampionX common stock will be net of any required withholding taxes.

 

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Q:

What is the aggregate number of shares of ChampionX common stock being offered in this Exchange Offer?

 

A:

In this Exchange Offer, Ecolab is offering to exchange all of the shares of ChampionX common stock held by it. In addition, ChampionX will authorize the issuance of a number of shares of ChampionX common stock such that the total number of shares of ChampionX common stock outstanding immediately prior to the Distribution will be that number that results in the Merger Exchange Ratio equaling one. Ecolab currently expects that approximately 122.0 million shares of ChampionX common stock will be available in this Exchange Offer. See “Exchange Offer—Terms of This Exchange Offer.”

 

Q:

What happens if not enough shares of Ecolab common stock are tendered to allow Ecolab to exchange all of the shares of ChampionX common stock it holds?

 

A:

If this Exchange Offer is consummated but less than all shares of ChampionX common stock are exchanged because this Exchange Offer is not fully subscribed, the additional shares of ChampionX common stock owned by Ecolab will be distributed in a clean-up spin-off. The record date for the clean-up spin-off, if any, will be announced by Ecolab. Any Ecolab stockholder who validly tenders (and does not properly withdraw) shares of Ecolab common stock for that are accepted for exchange in this Exchange Offer will with respect to such shares waive their rights to receive, and forfeit any rights to, shares of ChampionX common stock in the clean-up spin-off. See “Exchange Offer—Distribution of ChampionX Common Stock Remaining After This Exchange Offer.”

 

Q:

What happens if Ecolab declares a dividend during this Exchange Offer?

 

A:

If Ecolab declares a dividend and the record date for that dividend occurs during this Exchange Offer, you will be eligible to receive that dividend if you continue to own your shares of Ecolab common stock as of that record date.

 

Q:

Will tendering my shares affect my ability to receive the Ecolab quarterly dividend?

 

A:

No. If a dividend is declared by Ecolab with a record date before the completion of this Exchange Offer, you will be entitled to that dividend even if you tendered your shares of Ecolab common stock. Tendering your shares of Ecolab common stock in this Exchange Offer is not a sale or transfer of those shares until they are accepted for exchange upon completion of this Exchange Offer.

 

Q:

Will all shares of Ecolab common stock that I tender be accepted for exchange in this Exchange Offer?

 

A:

Not necessarily. Depending on the number of shares of Ecolab common stock validly tendered in this Exchange Offer and not properly withdrawn, the calculated per-share value of Ecolab common stock and the per-share value of ChampionX common stock determined as described above, Ecolab may have to limit the number of shares of Ecolab common stock that it accepts for exchange in this Exchange Offer through a proration process. Any proration of the number of shares accepted for exchange in this Exchange Offer will be determined on the basis of the proration mechanics described in “Exchange Offer—Terms of This Exchange Offer—Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of Ecolab Common Stock.”

An exception to proration can apply to stockholders (other than participants in the Ecolab Savings Plans) who beneficially own “odd lots,” that is, fewer than 100 shares of Ecolab common stock. Such beneficial holders of Ecolab common stock who validly tender all of their shares will not be subject to proration.

In all other cases, proration for each tendering stockholder will be based on (i) the proportion that the total number of shares of Ecolab common stock to be accepted for exchange bears to the total number of shares of Ecolab common stock validly tendered and not properly withdrawn and (ii) the number of shares of Ecolab common stock validly tendered and not properly withdrawn by that stockholder (and not on that stockholder’s aggregate ownership of shares of Ecolab common stock). Any shares of Ecolab common stock not accepted for exchange as a result of proration will be returned to tendering stockholders promptly after the final proration factor is determined.

 

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Q:

Will I be able to sell my shares of ChampionX common stock after this Exchange Offer is completed?

 

A:

No. There currently is no trading market for ChampionX common stock and no such trading market will be established in the future. The Exchange Offer agent will hold all issued and outstanding shares of ChampionX common stock in trust for the benefit of the tendering Ecolab stockholders until the shares of ChampionX common stock are converted into the right to receive shares of Apergy common stock in the Merger. Participants in this Exchange Offer will not receive such shares of ChampionX common stock, but will receive the shares of Apergy common stock issuable in the Merger, which can be sold in accordance with applicable securities laws. See “Exchange Offer—Distribution of ChampionX Common Stock Remaining After This Exchange Offer.”

 

Q:

How many shares of Ecolab common stock will Ecolab accept for exchange if this Exchange Offer is completed?

 

A:

The number of shares of Ecolab common stock that will be accepted for exchange in this Exchange Offer if this Exchange Offer is completed will depend on the final exchange ratio, the number of shares of ChampionX common stock offered and the number of shares of Ecolab common stock tendered. Ecolab currently expects that approximately 122.0 million shares of ChampionX common stock will be available in this Exchange Offer. Assuming that Ecolab offers 122.0 million shares of ChampionX common stock and that this Exchange Offer is fully subscribed, the largest possible number of shares of Ecolab common stock that will be accepted for exchange in this Exchange Offer would be 122.0 million divided by the final exchange ratio. For example, assuming that the final exchange ratio is 21.6285 (the current indicative exchange ratio based on the daily VWAPs of Ecolab common stock and Apergy common stock on April 27, 2020, April 28, 2020, and April 29, 2020), then Ecolab would accept for exchange up to a total of approximately 5.6 million shares of Ecolab common stock.

 

Q:

Are there any conditions to Ecolab’s obligation to complete this Exchange Offer?

 

A:

Yes. This Exchange Offer is subject to various conditions listed under “Exchange Offer—Conditions to Consummation of This Exchange Offer.” If any of these conditions are not satisfied or waived prior to the expiration of this Exchange Offer, Ecolab will not be required to accept shares for exchange and may extend or terminate this Exchange Offer.

Ecolab may waive any of the conditions to this Exchange Offer prior to the expiration of this Exchange Offer. For a description of the material conditions precedent to this Exchange Offer, including satisfaction or waiver of the conditions to the Transactions, the receipt of Apergy stockholder approval of the Share Issuance Proposal, and other conditions, see “Exchange Offer—Conditions to Consummation of This Exchange Offer.” ChampionX has no right to waive any of the conditions to this Exchange Offer. Apergy has no right to waive any of the conditions to this Exchange Offer (however, Apergy does have the right to waive certain conditions relating to the Merger).

 

Q:

When does this Exchange Offer expire?

 

A:

This Exchange Offer will expire, meaning the period during which you are permitted to tender your shares of Ecolab common stock in this Exchange Offer will end, at 12:01 a.m., New York City time, on June 3, 2020, unless Ecolab extends this Exchange Offer. See “Exchange Offer—Terms of This Exchange Offer—Extension; Termination; Amendment.”

 

Q:

Can this Exchange Offer be extended and under what circumstances?

 

A:

Yes. Subject to its compliance with the Merger Agreement and Separation Agreement, Ecolab can extend this Exchange Offer, in its sole discretion, at any time and from time to time. For instance, this Exchange Offer may be extended if any of the conditions to consummation of this Exchange Offer listed under “Exchange Offer—Conditions to Consummation of This Exchange Offer” are not satisfied or waived prior to the expiration of this Exchange Offer. In case of an extension of this Exchange Offer, Ecolab will publicly announce the extension by press release no later than 9:00 a.m., New York City time, on the next

 

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  business day following the previously scheduled expiration date. In addition, if the upper limit on the number of shares of ChampionX common stock that can be received for each share of Ecolab common stock tendered and accepted for exchange is in effect, then the exchange ratio will be fixed at the upper limit.

 

Q:

How do I participate in this Exchange Offer?

 

A:

The procedures you must follow to participate in this Exchange Offer will depend on whether you hold your shares of Ecolab common stock in certificated form, through a bank, broker or other nominee, as a participant in any of the Ecolab Savings Plans or the Ecolab Stock Purchase Plan, or if your shares of Ecolab common stock are held in book-entry via the Direct Registration System, which we refer to as DRS. For specific instructions about how to participate in this Exchange Offer, see “Exchange Offer—Terms of This Exchange Offer—Procedures for Tendering.”

 

Q:

How can I participate in this Exchange Offer if shares of Ecolab common stock are held for my account under an Ecolab Savings Plan or the Ecolab Stock Purchase Plan?

 

A:

Shares of Ecolab common stock (or units in respect of shares of Ecolab common stock) held for the account of participants in the Ecolab Savings Plans and the Ecolab Stock Purchase Plan are eligible for participation in this Exchange Offer. An Ecolab Savings Plan or Ecolab Stock Purchase Plan participant may direct that all, some or none of the shares of Ecolab common stock (or units in respect of shares of Ecolab common stock) allocated to his or her Ecolab Savings Plans account or Ecolab Stock Purchase Plan account be exchanged, subject to the rules applicable to the Ecolab Savings Plans and the Ecolab Stock Purchase Plan for participating in this Exchange Offer. The rules and procedures for tendering shares of Ecolab common stock (or units in respect of shares of Ecolab common stock) held by the Ecolab Savings Plan or the Ecolab Stock Purchase Plan for the account of participants will be different than those described in this prospectus. For example, the process for submitting instructions to tender or withdraw the tender of Ecolab Savings Plan or Ecolab Stock Purchase Plan shares (or units in respect of shares of Ecolab common stock) may be different, and the deadlines for receipt of such instructions may be earlier than the expiration date of this Exchange Offer (including any extensions thereof).

The rules applicable to the Ecolab Savings Plans and the Ecolab Stock Purchase Plan are described separate notices, which will be made available to the Ecolab Savings Plan and Ecolab Stock Purchase Plan participants. Ecolab Savings Plan and Ecolab Stock Purchase Plan participants should consult this additional notice together with this prospectus in deciding whether or not to participate in this Exchange Offer with respect to their Ecolab Savings Plan and Ecolab Stock Purchase Plan shares (or units in respect of shares of Ecolab common stock).

For specific instructions about how to tender the shares of Ecolab common stock attributable to your account, see “Exchange Offer—Terms of This Exchange Offer—Procedures for Tendering.”

If you do not elect to exchange some or all of the shares of Ecolab common stock attributable to your account for shares of ChampionX common stock (in each case, or units in respect of shares), you may still receive shares of ChampionX common stock (or units in respect of shares of ChampionX common stock) in the clean-up spin-off (in the event this Exchange Offer is not fully subscribed or is terminated) in respect of the shares of Ecolab common stock (or units in respect of shares of Ecolab common stock) attributable to your account. Upon the closing of the Merger, any shares of ChampionX common stock attributable to your account (or units in respect of shares of ChampionX common stock) will be converted into shares of Apergy common stock (or units in respect of shares of Apergy common stock).

After the closing of the Merger, the plan design may be changed or the independent fiduciary responsible for evaluating the propriety of investment options under the applicable Ecolab Savings Plan may conclude that the applicable Ecolab Savings Plan will no longer maintain an Apergy stock fund, in which case you may be required to sell the shares of Apergy common stock attributable to your account (or units in respect of shares of Apergy common stock) and reallocate the sale proceeds to one or more of the other investment options within the applicable Ecolab Savings Plan.

 

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Q:

Will holders of Ecolab stock options, restricted stock units (“RSUs”) and performance-based restricted stock units (“PBRSUs”) have the opportunity to exchange their awards for ChampionX common stock in this Exchange Offer?

 

A:

No, holders of Ecolab stock options, RSUs and PBRSUs cannot tender the shares underlying such awards in this Exchange Offer. If you hold shares of Ecolab common stock as a result of the vesting and settlement of RSUs or PBRSUs or as a result of the exercise of vested stock options, in each case, during this Exchange Offer, these shares can be tendered in this Exchange Offer.

 

Q:

Can I tender only a portion of my shares of Ecolab common stock in this Exchange Offer?

 

A:

Yes. You may tender all, some or none of your shares of Ecolab common stock.

 

Q:

What do I do if I want to retain all of my shares of Ecolab common stock?

 

A:

If you want to retain all of your shares of Ecolab common stock, you do not need to take any action. However, after the consummation of the Transactions, the ChampionX Business will no longer be owned by Ecolab, and as a holder of Ecolab common stock you will no longer hold shares in a company that owns the ChampionX Business (unless a clean-up spin-off is effected or unless this Exchange Offer is terminated and Ecolab effects a spin-off).

 

Q:

Can I change my mind after I tender my shares of Ecolab common stock and before this Exchange Offer expires?

 

A:

Yes. You may withdraw your tendered shares at any time before this Exchange Offer expires. See “Exchange Offer—Terms of This Exchange Offer—Withdrawal Rights.” If you change your mind again, you can re-tender your shares of Ecolab common stock by following the tender procedures again prior to the expiration of this Exchange Offer.

 

Q:

Are there any material differences between the rights of holders of Ecolab common stock and Apergy common stock?

 

A:

Yes. While each of Ecolab and Apergy is a Delaware corporation, each is subject to different organizational documents. Holders of Ecolab common stock, whose rights are currently governed by Ecolab’s organizational documents, will, with respect to the shares validly tendered and exchanged immediately following this Exchange Offer, become stockholders of Apergy and their rights will be governed by Apergy’s organizational documents. For a discussion of the material differences between the rights of holders of Ecolab common stock and Apergy common stock, see “Comparison of the Rights of Stockholders Before and After The Transactions.”

 

Q:

Are there any appraisal rights for holders of shares of Ecolab common stock in connection with this Exchange Offer?

 

A:

No. There are no appraisal rights available to holders of shares of Ecolab common stock under the DGCL in connection with this Exchange Offer.

 

Q:

What will Ecolab do with the shares of Ecolab common stock that are tendered, and what is the impact of this Exchange Offer on Ecolab’s share count?

 

A:

The shares of Ecolab common stock that are tendered in this Exchange Offer will be held as treasury stock by Ecolab unless and until retired or used for other purposes. Any shares of Ecolab common stock acquired by Ecolab in this Exchange Offer will reduce the total number of shares of Ecolab common stock outstanding, although Ecolab’s actual number of shares outstanding on a given date reflects a variety of factors such as option exercises.

 

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Q:

What will happen to any remaining shares of ChampionX common stock owned by Ecolab in the clean-up spin-off following the consummation of this Exchange Offer?

 

A:

In the event that this Exchange Offer is not fully subscribed, any remaining shares of ChampionX common stock owned by Ecolab that are not exchanged in this Exchange Offer will be distributed on a pro rata basis to Ecolab stockholders whose shares of Ecolab common stock remain outstanding following the consummation of this Exchange Offer. Upon consummation of this Exchange Offer, Ecolab will deliver to the Exchange Offer agent a book-entry authorization representing (a) all of the shares of ChampionX common stock being exchanged in this Exchange Offer, with instructions to hold the shares of ChampionX common stock as agent for the holders of shares of Ecolab common stock validly tendered and not properly withdrawn in this Exchange Offer whose shares are accepted in this Exchange Offer and (b) in the case of a clean-up spin-off, if any, Ecolab stockholders whose shares of Ecolab common stock remain outstanding after the consummation of this Exchange Offer. See “Exchange Offer—Terms of This Exchange Offer—Exchange of Shares of Ecolab Common Stock.” Prior to or at the effective time of the Merger, Apergy will deposit with the Exchange Offer agent evidence in book-entry form representing the shares of Apergy common stock issuable in the Merger. Such shares of Apergy common stock will be delivered promptly following the effectiveness of the Merger, pursuant to the procedures determined by the Exchange Offer agent. See “Exchange Offer—Terms of This Exchange Offer—Exchange of Shares of Ecolab Common Stock.” If this Exchange Offer is terminated by Ecolab on or prior to the expiration date of this Exchange Offer without the exchange of shares, but the conditions to consummation of the Transactions have otherwise been satisfied, Ecolab intends to distribute all shares of ChampionX common stock owned by Ecolab on a pro rata basis to holders of Ecolab common stock, with a record date to be announced by Ecolab. Such distributed shares of ChampionX common stock will convert to Apergy common stock in the Merger.

 

Q:

If I tender some or all of my shares of Ecolab common stock in this Exchange Offer, will I receive any shares of ChampionX common stock in the clean-up spin-off?

 

A:

Ecolab stockholders who validly tender (and do not properly withdraw) shares of Ecolab common stock that are accepted for exchange in this Exchange Offer will, with respect to such shares, waive their rights to receive, and forfeit any rights to, shares of ChampionX common stock distributed in the clean-up spin-off. However, in the event any of your tendered shares are not accepted for exchange in this Exchange Offer for any reason, or you do not tender all of your shares of Ecolab common stock, such shares that are not accepted for exchange or were not tendered would be entitled to receive shares of ChampionX common stock in the clean-up spin-off.

 

Q:

Whom do I contact for information regarding this Exchange Offer?

 

A:

You may call the information agent, Georgeson, at 866-857-2624, to ask any questions about this Exchange Offer or to request additional documents, including copies of this document and the letter of transmittal (including the instructions thereto).

 

Questions

and Answers about the Transactions

 

Q:

What are the transactions described in this prospectus?

 

A:

References to the “Transactions” mean the transactions contemplated by the Merger Agreement and the Separation Agreement. These agreements provide for, among other things:

 

   

the separation of the upstream energy business of Ecolab, which we refer to as the ChampionX Business, from the other businesses of Ecolab, which we refer to as the Separation;

 

   

the distribution by Ecolab, pursuant to the Separation Agreement, which we refer to as the Distribution, of (i) up to 100% of the shares of ChampionX common stock to Ecolab’s stockholders in this Exchange Offer followed, if necessary, by the clean-up spin-off or (ii) if this Exchange Offer is terminated, all of the outstanding shares of ChampionX common stock to Ecolab stockholders on a pro rata basis; and

 

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the merger of Merger Sub with and into ChampionX, with ChampionX continuing as the surviving corporation and as a wholly owned subsidiary of Apergy, as contemplated by the Merger Agreement, which we refer to as the Merger.

The Separation, the Distribution and the Merger are described in more detail in “The Transactions” and elsewhere in this prospectus.

 

Q:

What will happen in the Separation?

 

A:

Pursuant to the Separation Agreement, Ecolab and certain of Ecolab’s subsidiaries will engage in a series of transactions in which, among other things, (a) certain assets and liabilities related to the ChampionX Business that are not currently owned by ChampionX will be transferred from Ecolab and certain of its subsidiaries to ChampionX and entities that will become ChampionX subsidiaries and (b) certain assets and liabilities related to Ecolab’s other businesses that are currently owned by ChampionX will be transferred from ChampionX to Ecolab and certain of its subsidiaries that will not be ChampionX subsidiaries. The purpose of these transactions is to separate the ChampionX Business from Ecolab’s other businesses.

 

Q:

What will happen in the Merger?

 

A:

Pursuant to the Merger Agreement, in the Merger, Merger Sub will merge with ChampionX, and ChampionX will survive the Merger as a wholly owned subsidiary of Apergy. Following the closing of the Merger, Apergy will continue to be a separately traded public company and will own and operate the combined businesses of Apergy and ChampionX. At the effective time of the Merger, each issued and outstanding share of ChampionX common stock (except for shares of ChampionX common stock held by ChampionX, which shares will be canceled and cease to exist, and no consideration will be delivered in exchange therefor) will be converted into the right to receive a number of duly authorized, validly issued, fully paid and nonassessable shares of Apergy common stock equal to the Merger Exchange Ratio. The Merger Exchange Ratio is calculated under the Merger Agreement such that immediately following the Merger, ChampionX equityholders will hold approximately 62% of Apergy’s common stock on a fully-diluted basis and Apergy equityholders will hold approximately 38% of Apergy’s common stock on a fully-diluted basis.

 

Q:

What are Ecolab’s reasons for the Transactions?

 

A:

In reaching a decision to proceed with the Transactions, the Ecolab Board of Directors, which we refer to as the Ecolab Board, and Ecolab’s senior management considered, among other things, (i) the expected strategic and operational benefits of separating the ChampionX Business from Ecolab’s other businesses; (ii) the greater scale and enhanced competitive position that would be created through the combination of the ChampionX Business with Apergy; (iii) the potential synergies associated with a combination of Apergy and the ChampionX Business, and the results of the due diligence review of Apergy’s business conducted by Ecolab’s management and advisors; (iv) the belief of the Ecolab Board that the Transactions reflect a compelling valuation for the ChampionX Business, and that the Ecolab Board considered the value of approximately 62% of the combined company to exceed the value of the standalone ChampionX Business following a spin-off, particularly after taking the potential synergies into account; (v) the fact that Ecolab equityholders would own approximately 62% of the combined company on a fully diluted basis following the Merger and would have the opportunity to participate in any increase in the value of the shares of Apergy common stock following the effective time of the Merger, including potential increases in stockholder value associated with executing on the identified synergy opportunities; (vi) the fact that two individuals designated by Ecolab would be directors of the combined company following the Merger; (vii) the fact that none of the inquiries received by Ecolab following the spin-off announcement from parties potentially interested in an acquisition of or other combination transaction involving the ChampionX Business resulted in any proposal which Ecolab expected would have provided after-tax value in excess of that contemplated by the Transactions; (viii) the fact that Ecolab will receive the Cash Payment in the Transactions, which may be used for debt reduction, dividends and/or share repurchases and (ix) the fact that Transactions will provide Ecolab’s stockholders with the choice to own the Ecolab business, the ChampionX Business (as a part of the combined company), or both. The Ecolab Board and Ecolab’s senior

 

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  management also considered that the Transactions generally would be tax-efficient for Ecolab and its stockholders. See “The Transactions—Ecolab’s Reasons for the Transactions.”

 

Q:

What are Apergy’s reasons for the Transactions?

 

A:

In reaching its decision to approve the Transactions and recommend that Apergy stockholders approve the Share Issuance, the Apergy Board of Directors considered, among other things, the strategic and financial benefits that could be achieved by combining Apergy and the ChampionX Business relative to the future prospects of Apergy on a stand-alone basis, the relative actual results of operations and prospects of Apergy and of the ChampionX Business and synergies expected to be realized in the combination, as well as other alternatives that may be available to Apergy, and the risks and uncertainties associated with the Transactions and with such alternatives. See “The Transactions—Apergy’s Reasons for the Transactions.”

 

Q:

What will I receive in the Transactions?

 

A:

In this Exchange Offer, Ecolab will offer to Ecolab stockholders the right to exchange all or a portion of their shares of Ecolab common stock for shares of ChampionX common stock. In the event this Exchange Offer is not fully subscribed, Ecolab will distribute in the clean-up spin-off the remaining shares of ChampionX common stock owned by Ecolab on a pro rata basis to Ecolab stockholders whose shares of Ecolab common stock remain outstanding after the consummation of this Exchange Offer. If this Exchange Offer is terminated by Ecolab without the exchange of shares (but the conditions to consummation of the Transactions have otherwise been satisfied), Ecolab intends to distribute all shares of ChampionX common stock owned by Ecolab on a pro rata basis to holders of Ecolab common stock, with a record date to be announced by Ecolab. In the Merger, the shares of ChampionX common stock will be converted into the right to receive shares of Apergy common stock. Thus, each ChampionX stockholder will ultimately receive shares of Apergy common stock in the Transactions. ChampionX stockholders will not be required to pay for the shares of ChampionX common stock distributed in the clean-up spin-off, if applicable, or the shares of Apergy common stock issued in the Merger. ChampionX stockholders will receive cash from the Exchange Offer agent in lieu of any fractional shares of Apergy common stock (after such fractional shares are aggregated with all other fractional shares that would be issued to such holder) to which such stockholders would otherwise be entitled. All shares of Apergy common stock issued in the Merger will be issued in book-entry form. Stockholders of record will receive additional information from the Exchange Offer agent shortly after the closing of the Merger. Beneficial holders will receive information from their bank, broker or other nominee.

 

Q:

What will Apergy stockholders receive in the Merger?

 

A:

Apergy stockholders will not directly receive any consideration in the Merger. All shares of Apergy common stock issued and outstanding immediately before the Merger will remain issued and outstanding after the consummation of the Merger. Immediately after the Merger, Apergy stockholders will continue to own shares in Apergy, which will include the ChampionX Business, including ChampionX, as a wholly owned subsidiary of Apergy.

 

Q:

What is the estimated total value of the consideration to be paid by Apergy to ChampionX stockholders in the Transactions?

 

A:

Based upon the reported closing price for Apergy common stock on the NYSE of $30.67 per share on December 18, 2019, the last trading day before the announcement of the signing of the Merger Agreement, the estimated total value of the shares to be issued by Apergy to ChampionX stockholders in the Merger (excluding applicable holders of the equity awards described below) would have been approximately $3.9 billion. Based upon the reported closing price for Apergy common stock on the NYSE of $8.35 per share on April 24, 2020, the estimated total value of the shares to be issued by Apergy to ChampionX stockholders pursuant to the Merger (excluding applicable holders of the equity awards described below) would be approximately $1.02 billion. The actual total value of the consideration to be paid by Apergy in connection with the Merger will depend on the market price of shares of Apergy common stock at the time of the closing of the Merger.

 

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Q:

Are there possible adverse effects on the value of Apergy common stock to be received by ChampionX stockholders who participate in this Exchange Offer?

 

A:

Ecolab stockholders that participate in this Exchange Offer will be exchanging their shares of Ecolab common stock for shares of ChampionX common stock at a discount to the per-share value of Apergy common stock, subject to the upper limit. The existence of a discount, along with the Share Issuance, may negatively affect the market price of Apergy common stock. Apergy also expects to incur significant expenses related to the Transactions, including those related to legal, advisory, printing and financial services fees and transition and integration expenses. The incurrence of these costs may have an adverse impact on Apergy’s liquidity or operating results in the periods in which they are incurred. Finally, Apergy will be required to devote a significant amount of time and attention to the process of integrating the operations of Apergy and the ChampionX Business. If Apergy is not able to effectively manage the process, Apergy’s business could suffer and its stock price may decline. In addition, the market price of Apergy common stock could decline as a result of sales of a large number of shares of Apergy common stock in the market after the consummation of the Transactions or even the perception that these sales could occur. See “Risk Factors” for a further discussion of the material risks associated with the Transactions.

 

Q:

Will ChampionX make any payments to Ecolab in connection with the Separation and the Distribution?

 

A:

In connection with the Separation and the Distribution, ChampionX will make a cash payment, which we refer to as the Cash Payment, to Ecolab of an amount equal to $525 million plus an estimate of the aggregate amount of certain taxes paid by Ecolab prior to the Separation effective time that are allocated to Apergy under the Tax Matters Agreement (which shall not exceed $12 million), which amount we refer to as the Tax Amount.

 

Q:

How will the Transactions impact the future liquidity and capital resources of Apergy?

 

A:

Following completion of the Merger, Apergy will maintain the Apergy Credit Facility and the ChampionX Credit Facility. In connection with the Merger Agreement, (i) ChampionX entered into the Commitment Letter with the Commitment Parties, pursuant to which the Commitment Parties committed to provide to ChampionX, subject to customary closing conditions, up to $537 million of senior secured term loans and (ii) Apergy entered into the First Amendment to Apergy Credit Agreement, pursuant to which certain of the Apergy Lenders agreed to provide, upon consummation of and in connection with the Merger, up to $150 million additional revolving commitments under the Apergy Credit Agreement. ChampionX expects to close the ChampionX Credit Facility substantially simultaneously with the closing of the Merger and the Contribution and Distribution and to apply the proceeds thereof as described below. Immediately prior to the consummation of the Merger, ChampionX will use the proceeds of the ChampionX Credit Facility to finance the Cash Payment to Ecolab and otherwise pay certain expenses in connection with the Transactions. In connection with the Merger, the ChampionX Credit Facility and the Apergy Credit Facility (i) Apergy and certain of its subsidiaries will become guarantors under the ChampionX Credit Facility, and will pledge certain of their assets to secure amounts outstanding under the ChampionX Credit Facility and (ii) ChampionX and certain of its subsidiaries will become guarantors under the Apergy Credit Facility, and will pledge certain of their assets to secure amounts outstanding under the Apergy Credit Facility. Apergy anticipates that, following the consummation of the Merger, its primary sources of liquidity for working capital and operating activities, including any future acquisitions, will be cash from operations and borrowings under the Apergy Credit Facility. Apergy expects that these sources of liquidity will be sufficient to make required payments of interest on its outstanding debt and to fund working capital and capital expenditure requirements, including costs relating to the Transactions.

 

Q:

Will the Distribution or the Merger affect employees or former employees of Ecolab who hold Ecolab equity-based awards?

 

A:

Yes. Certain employees of Ecolab hold stock options to purchase shares of Ecolab common stock, as well as restricted stock units and performance-based restricted stock units that may be settled in, or whose value is otherwise determined by reference to the value of, Ecolab common stock.

 

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Each option to purchase shares of Ecolab common stock (an “Ecolab Option”) that is outstanding immediately prior to the effective time of the Merger and that is held by a ChampionX Employee (as defined in “Additional Agreements Related to the Separation, the Distribution and the Merger—Employee Matters Agreement—Transfer of ChampionX and Ecolab Employees and Independent Contractors and Liability for Related Costs”), whether vested or unvested, will automatically be assumed by Apergy at the effective time of the Merger (each, an “Apergy Option”) and will be subject to the same terms and conditions as were applicable to the corresponding Ecolab Option immediately prior to the effective time of the Merger, except that each Apergy Option shall (i) relate to a number of shares of Apergy common stock (with each discrete grant rounded down to the nearest whole share) equal to the product of (x) the number of shares of Ecolab common stock issuable upon the exercise of the corresponding Ecolab Option immediately prior to the effective time of the Merger and (y) the Equity Award Adjustment Ratio, and (ii) have a per-share exercise price (rounded up to the nearest whole cent) equal to the quotient determined by dividing (x) the per share exercise price of the corresponding Ecolab Option by (y) the Equity Award Adjustment Ratio.

“Equity Award Adjustment Ratio” means (A) the closing trading price per share of Ecolab common stock divided by (B) the closing trading price per share of Apergy common stock, in both cases as determined immediately prior to the Separation effective time.

 

   

Each award granted by Ecolab that was denominated as a “Restricted Stock Unit” under the terms of the applicable Ecolab equity plan and the related award agreement (each, an “Ecolab Restricted Stock Unit”) that is outstanding immediately prior to the effective time of the Merger and that is held by a ChampionX Employee, whether vested or unvested, shall automatically be assumed by Apergy at the effective time of the Merger (each, an “Apergy Restricted Stock Unit”) and will be subject to the same terms and conditions as were applicable to the corresponding Ecolab Restricted Stock Unit immediately prior to the effective time of the Merger, except that each grant of Apergy Restricted Stock Units shall (i) relate to that number of shares of Apergy common stock (with each discrete grant rounded up to the nearest whole share) equal to the product of (x) the number of shares of Ecolab common stock that were issuable upon the vesting of such Ecolab Restricted Stock Units immediately prior to the effective time of the Merger and (y) the Equity Award Adjustment Ratio and (ii) be subject to vesting solely based on continued service with ChampionX and its direct or indirect subsidiaries (the “ChampionX Group”) and, following the effective time of the Merger, Apergy and its direct or indirect subsidiaries (the “Apergy Group”).

 

   

Each award granted by Ecolab that was denominated as a “Performance Stock Unit” under the terms of the applicable Ecolab equity plan and the related award agreement (each, an “Ecolab Performance Based Restricted Stock Unit”) that is outstanding immediately prior to the effective time of the Merger and that is held by a ChampionX Employee, whether vested or unvested, will be assumed by Apergy at the effective time of the Merger and converted into a restricted stock unit denominated in shares of Apergy common stock (each, an “Apergy Adjusted Performance Based Restricted Stock Unit”) and will be subject to the same terms and conditions as were applicable to the corresponding Ecolab Performance Based Restricted Stock Unit immediately prior to the effective time of the Merger, except that (i) the performance-based vesting conditions applicable to such Ecolab Performance Based Restricted Stock Unit immediately prior to the effective time of the Merger shall not apply from and after the effective time of the Merger, and (ii) each grant of Apergy Adjusted Performance Based Restricted Stock Units shall (x) relate to that number of shares of Apergy common stock (with each discrete grant rounded up to the nearest whole share) equal to the product of (A) the number of shares of Ecolab common stock that were issuable upon the vesting of such Ecolab Performance Based Restricted Stock Unit immediately prior to the effective time of the Merger assuming attainment of the applicable performance metrics at the target level of performance and (B) the Equity Award Adjustment Ratio and (y) be subject to vesting solely based on continued service with the ChampionX Group and the Apergy Group.

 

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All Ecolab equity awards, other than those described above, will be retained by Ecolab. Ecolab may equitably adjust its retained equity awards in accordance with the terms and conditions of the applicable Ecolab equity plan and award agreement in the event of a clean-up spin-off or, if this Exchange Offer is terminated, a distribution by Ecolab of the outstanding shares of ChampionX common stock to Ecolab stockholders on a pro rata basis.

 

Q:

What are the material U.S. federal income tax consequences to Ecolab stockholders resulting from the Distribution and the Merger?

 

A:

The consummation of the Distribution and the Merger is conditioned upon the receipt by Ecolab of an opinion of its counsel, to the effect that (among other things) (x) the transfer of assets from Ecolab to ChampionX and the assumption of liabilities by ChampionX from Ecolab pursuant to the Internal Restructuring (as defined in and contemplated by the Separation Agreement) or otherwise arising out of or resulting from the transactions contemplated by the Separation Agreement (which we collectively refer to as the Contribution) and the Distribution, taken together, will qualify as a transaction described in Sections 355 and 368(a)(1)(D) of the Code, which we refer to as the Distribution Tax Opinion, and (y) the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code, which we refer to as the Merger Tax Opinion. Assuming the Contribution and Distribution so qualify and the Merger is so treated, Ecolab stockholders are not expected to recognize any gain or loss for U.S. federal income tax purposes as a result of the Distribution or the Merger, except for any gain or loss attributable to the receipt of cash in lieu of a fractional share of Apergy common stock pursuant to the Merger. The material U.S. federal income tax consequences of the Distribution and the Merger are described in more detail under “U.S. Federal Income Tax Consequences of the Distribution and the Merger.”

 

Q:

What are the material U.S. federal income tax consequences to Apergy and Apergy stockholders resulting from the Distribution and the Merger?

 

A:

Neither Apergy nor Apergy stockholders will recognize any gain or loss for U.S. federal income tax purposes as a result of the Distribution or the Merger. Because Apergy stockholders will not participate in the Distribution or the Merger, Apergy stockholders will generally not recognize gain or loss upon either the Distribution or the Merger. Apergy stockholders should consult their own tax advisors for a full understanding of the tax consequences to them of the Distribution and the Merger.

 

Q:

Are there risks associated with the Transactions?

 

A:

Yes. Apergy and ChampionX may not realize the expected benefits of the Transactions because of the risks and uncertainties discussed in the section entitled “Risk Factors” beginning on page 41 and the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 66. These risks include, among others, risks relating to the uncertainty that the Transactions will close, the uncertainty that Apergy will be able to integrate the ChampionX Business successfully, and uncertainties relating to the performance of Apergy after the Transactions.

 

Q:

Who will serve on the Apergy Board of Directors following the closing of the Merger?

 

A:

Immediately after the Merger, the Apergy Board of Directors will consist of nine directors: the seven current Apergy directors and two additional directors designated by Ecolab. One of the Ecolab board designees shall be appointed as a Class I director of Apergy, and the second of the Ecolab board designees shall be appointed as a Class II director of Apergy. Each of the directors designated by Ecolab must qualify as an independent director, as such term is defined in NYSE Rule 303A.02. See “The Transactions—Board of Directors and Executive Officers of Apergy Following the Merger; Operations Following the Merger” for more detailed information.

 

Q:

Who will manage the business of Apergy after the Transactions?

 

A:

Apergy’s current President and Chief Executive Officer, Sivasankaran Somasundaram, and current Senior Vice President and Chief Financial Officer, Jay A. Nutt, will continue in their roles. Deric Bryant, current

 

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  Executive Vice President & President of Ecolab’s Upstream Energy business, is expected to serve as Chief Operating Officer. Certain members of the ChampionX management team are expected to join Apergy’s senior management team, as well. See “The Transactions—Board of Directors and Executive Officers of Apergy Following the Merger; Operations Following the Merger” for more detailed information.

 

Q:

What stockholder approvals are needed in connection with the Transactions?

 

A:

Apergy cannot complete the Transactions unless the proposal relating to the Share Issuance is approved by the affirmative vote of the holders of a majority of the voting power of Apergy present online or represented by proxy and entitled to vote on such matter, at a special meeting at which a quorum is present. No vote of Ecolab stockholders is required or being sought in connection with the Transactions.

 

Q:

Where will the Apergy shares issued in connection with the Merger be listed?

 

A:

Apergy common stock is listed on NYSE under “APY.” After consummation of the Transactions, all shares of Apergy common stock issued in the Merger, and all other outstanding shares of Apergy common stock, will continue to be listed on NYSE.

 

Q:

What is the current relationship between ChampionX and Apergy?

 

A:

ChampionX is currently a wholly owned subsidiary of Ecolab and was formed as a Delaware corporation on September 18, 2019 to own and operate the ChampionX Business. Other than in connection with the Transactions, there is no relationship between ChampionX and Apergy.

 

Q:

When will the Transactions be completed?

 

A:

The Transactions are expected to be completed in the second quarter of 2020, subject to receipt of Apergy stockholder approval, applicable antitrust and other regulatory approvals, and satisfaction of other customary closing conditions.

 

Q:

Does Apergy have to pay a termination fee to Ecolab or reimburse Ecolab’s expenses if the Share Issuance Proposal is not approved by Apergy stockholders or if the Merger Agreement is otherwise terminated?

 

A:

In specified circumstances, depending on the reasons for termination of the Merger Agreement, Apergy may be required to pay Ecolab a termination fee of $89.8 million, which would be reduced by any expense reimbursement paid by Apergy in connection with termination as described in the following sentence. In certain circumstances of termination, Apergy is required to partially reimburse Ecolab in cash for fees and expenses incurred by Ecolab in connection with the Merger Agreement and the Transactions, equal to $25.0 million in the aggregate.

For a discussion of the circumstances under which the termination fee is payable by Apergy or Apergy is required to partially reimburse Ecolab’s expenses, see “The Transaction Agreements—The Merger Agreement—Termination Fee and Expenses Payable in Certain Circumstances” beginning on page 209.

 

Q:

Does Ecolab have to pay a termination fee to Apergy or reimburse Apergy’s expenses if the Merger Agreement is terminated?

 

A:

No.

 

Q:

Is ChampionX required to have a certain amount of cash in connection with the Merger? Is there a Net Debt Adjustment?

 

A:

The Separation Agreement provides that Ecolab will cause ChampionX to have at least $45 million in cash or cash equivalents remaining in the business at the Separation effective time. The Separation Agreement

 

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  also provides for a net debt adjustment. Based upon the actual amounts of indebtedness, cash and cash equivalents of ChampionX and certain tax amounts owed by ChampionX immediately prior to the closing of the Merger, ChampionX may be required to pay cash to Ecolab or Ecolab may be required to pay cash to ChampionX. Any such adjustment will occur following the closing of the Merger and will not impact the number of shares of Apergy common stock to be issued in the Merger. See “The Transaction Agreements—The Separation Agreement—Net Debt Adjustment.”

 

Q:

Will Apergy or ChampionX incur indebtedness in connection with the Separation, the Distribution and the Merger?

 

A:

In connection with the Transactions, ChampionX will enter into a credit agreement with respect to a $537 million senior secured term loan credit facility to finance the Cash Payment to Ecolab and otherwise pay certain expenses in connection with the Transactions. Also, in connection with the Transactions, Apergy has entered into an amendment to its existing credit agreement to, among other things, increase its revolving commitments thereunder by a principal amount up to $150 million. See “Additional Agreements Related to the Separation, the Distribution and the Merger.”

 

Q:

Can Apergy, Ecolab or ChampionX stockholders demand appraisal of their shares?

 

A:

No. None of Apergy, Ecolab or ChampionX stockholders have appraisal rights under Delaware law in connection with the Transactions.

 

Q:

Who can answer my questions about the Transactions?

 

A:

If you have any questions about the Transactions, please contact the information agent Georgeson, located at 1290 Avenue of the Americas, 9th Floor, New York, NY 10104 or at the telephone number 866-857-2624.

 

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SUMMARY

The following summary contains certain information described in more detail elsewhere in this prospectus. To better understand the proposed Transactions, and for a more complete description of the legal terms of the Separation, the Distribution and the Merger, you should read this entire prospectus carefully, as well as those additional documents to which we refer you. See also “Where You Can Find Additional Information; Incorporation by Reference.”

The Companies (See “Information About Apergy and Merger Sub,” “Information About Ecolab,” and “Information About the ChampionX Business” beginning on page 85)

Apergy Corporation

2445 Technology Forest Blvd

Building 4, 12th Floor

The Woodlands, Texas 77381

Telephone: (281) 403-5772

Apergy Corporation, which we refer to as Apergy, a Delaware corporation, is a leading provider of highly engineered equipment and technologies that help companies drill for and produce oil and gas safely and efficiently around the world. Apergy’s products provide efficient functioning throughout the lifecycle of a well, from drilling to completion to production. For more information on Apergy, see “Information About Apergy and Merger Sub.”

Athena Merger Sub, Inc.

c/o Apergy Corporation

2445 Technology Forest Blvd

Building 4, 12th Floor

The Woodlands, Texas 77381

Telephone: (281) 403-5772

Athena Merger Sub, Inc., which we refer to as Merger Sub, a wholly owned subsidiary of Apergy, was incorporated in the State of Delaware on December 16, 2019 for the purposes of merging with and into ChampionX in the Merger. Merger Sub has not carried on any activities other than in connection with the Merger Agreement. For more information on Merger Sub, see “Information About Apergy and Merger Sub.”

ChampionX Holding Inc.

11177 South Stadium Drive

Sugar Land, Texas 77478

Telephone: (281) 632-6500

ChampionX Holding Inc., which we refer to as ChampionX, a wholly owned subsidiary of Ecolab, was incorporated in the State of Delaware on September 18, 2019 to own and operate Ecolab’s ChampionX Business. In connection with the Transactions, among other things, Ecolab will cause specified assets and liabilities used in the ChampionX Business to be conveyed to ChampionX in exchange for the issuance to Ecolab of ChampionX common stock and the Cash Payment. For more information on the ChampionX Business, see “Information About the ChampionX Business.”

Ecolab Inc.

1 Ecolab Place

St. Paul, Minnesota 55102

Telephone: (800) 232-6522

 

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Ecolab Inc., which we refer to as Ecolab, is a Delaware corporation incorporated in 1924. With 2019 sales of $14.9 billion, Ecolab is the global leader in water, hygiene and energy technologies and services that protect people and vital resources. Ecolab delivers comprehensive programs, products and services to promote safe food, maintain clean environments, optimize water and energy use, and improve operational efficiencies for customers in the food, healthcare, energy, hospitality and industrial markets in more than 170 countries around the world. Ecolab’s cleaning and sanitizing programs and products, and pest elimination services, support customers in the foodservice, food and beverage processing, hospitality, healthcare, government and education, retail, textile care and commercial facilities management sectors. Ecolab’s products and technologies are also used in water treatment, pollution control, energy conservation, oil production and refining, steelmaking, papermaking, mining and other industrial processes. For more information on Ecolab, see “Information About Ecolab.”

The Transactions (See “The Transactions” beginning on page 150)

On December 18, 2019, Ecolab, ChampionX, Apergy and Merger Sub entered into the Merger Agreement and Ecolab, ChampionX and Apergy entered into the Separation Agreement, pursuant to which Apergy will combine with Ecolab’s ChampionX Business. As a result of and immediately following the Transactions, ChampionX equityholders will own, in the aggregate, approximately 62% of the issued and outstanding Apergy common stock on a fully diluted basis and Apergy equityholders will own, in the aggregate, approximately 38% of the issued and outstanding Apergy common stock on a fully diluted basis. Ecolab stockholders that do not participate in this Exchange Offer will retain the shares of Ecolab common stock that they held prior to the Merger.

In connection with the Transactions, Apergy, Ecolab and ChampionX have entered into the Separation Agreement to effect the Separation and Distribution and have entered into or will enter into several other agreements to provide a framework for their relationship after the Distribution and the Merger. These agreements provide for the allocation between Ecolab, on the one hand, and ChampionX and Apergy, on the other hand, of certain assets, liabilities and obligations related to the ChampionX Business and will govern the relationship between Ecolab, ChampionX and Apergy after the Distribution and the Merger. In connection with the Transactions:

 

  (1)

Apergy, ChampionX and Ecolab entered into an Employee Matters Agreement, which relates to, among other things, Ecolab, ChampionX and Apergy’s obligations with respect to current and former employees of the ChampionX Business;

 

  (2)

ChampionX and Ecolab will enter into a Transition Services Agreement, pursuant to which each party will, on a transitional basis, provide the other party with certain support services and other assistance after the Distribution and Merger;

 

  (3)

Apergy, ChampionX and Ecolab will enter into a Tax Matters Agreement, providing for, among other things, the allocation between Ecolab, on the one hand, and ChampionX and Apergy, on the other hand, of certain rights and obligations with respect to tax matters;

 

  (4)

ChampionX and Ecolab will enter into an Intellectual Property Matters Agreement, pursuant to which each party will license to the other certain intellectual property owned by such party but used by the other in its respective business as of the Distribution and Merger; and

 

  (5)

ChampionX and Ecolab will enter into a Cross-Supply and Product Transfer Agreement, pursuant to which Ecolab will supply ChampionX with certain products and ChampionX will provide Ecolab with certain products for a transitional period following the Distribution and Merger.

In addition, in connection with the Transactions, ChampionX will enter into a credit agreement with respect to a $537 million senior secured term loan credit facility to finance the Cash Payment to Ecolab and otherwise pay certain expenses in connection with the Transactions. Also, in connection with the Transactions, Apergy entered into an amendment to its existing credit agreement to, among other things, increase its revolving commitments thereunder by a principal amount up to $150 million.

 

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For a more complete discussion of the agreements related to the Transactions, see “The Transaction Agreements” and “Additional Agreements Related to the Separation, the Distribution and the Merger.”

Overview (See “The Transactions—Transaction Sequence” beginning on page 151)

Below is a step-by-step list illustrating the sequence of material events relating to the Separation, the Distribution and the Merger. Each of these events is discussed in more detail elsewhere in this prospectus. Apergy and Ecolab anticipate that the Separation, Distribution and Merger will occur in the following order:

Step 1: At or prior to the date of the Distribution (described in Step 3 below), Ecolab, ChampionX and certain of each of their subsidiaries will engage in a series of actions, which may include transfers of securities, formation of new entities or other actions, to effect an internal restructuring. The separation of the ChampionX Business from the other businesses of Ecolab pursuant to the Separation Agreement is referred to as the Separation. In connection with the Separation, ChampionX will (a) issue to Ecolab any additional shares of ChampionX common stock required such that the number of shares of ChampionX common stock held by Ecolab shall be equal to the number of shares required to effect the Distribution (described in Step 3 below), and (b) make the Cash Payment.

Step 2: On the Distribution Date (described in Step 3 below), to the extent not previously effected pursuant to Step 1, (a) Ecolab and certain Ecolab subsidiaries will transfer to ChampionX or a ChampionX designee certain assets related to the ChampionX Business and certain liabilities related to the ChampionX Business, and (b) if needed, ChampionX and certain ChampionX subsidiaries will transfer to Ecolab or an Ecolab designee assets excluded from the ChampionX Business and liabilities excluded from the ChampionX Business.

Step 3: On the closing date of the Merger, Ecolab will distribute 100% of the shares of ChampionX common stock to Ecolab stockholders participating in this Exchange Offer. If this Exchange Offer is consummated, but this Exchange Offer is not fully subscribed because fewer than all shares of ChampionX common stock owned by Ecolab are exchanged, the remaining shares of ChampionX common stock owned by Ecolab would be distributed in the clean-up spin-off to Ecolab stockholders whose shares of Ecolab common stock remain outstanding after consummation of this Exchange Offer. If this Exchange Offer is terminated by Ecolab without the exchange of shares (but the conditions to consummation of the Transactions have otherwise been satisfied), Ecolab intends to distribute all shares of ChampionX common stock owned by Ecolab on a pro rata basis to holders of Ecolab common stock, with a record date to be announced by Ecolab. See “The Transactions—The Separation and the Distribution—The Distribution.” The date on which the Distribution occurs is referred to as the Distribution Date.

The Exchange Offer agent will hold, for the account of the relevant Ecolab stockholders, the book-entry authorizations representing all of the outstanding shares of ChampionX common stock, pending the consummation of the Merger. Shares of ChampionX common stock will not be able to be traded during this period.

Step 4: In the Merger, Merger Sub will be merged with and into ChampionX, with ChampionX surviving as a wholly owned subsidiary of Apergy. In the Merger, each outstanding share of ChampionX common stock (except for shares of ChampionX common stock held by Ecolab, which shares will be canceled and cease to exist, and no consideration will be delivered in exchange therefor) will be converted into the right to receive a number of duly authorized, validly issued, fully paid and nonassessable shares of Apergy common stock such that ChampionX equityholders will own approximately 62% of the issued and outstanding Apergy common stock on a fully diluted basis and Apergy equityholders will own, in the aggregate, approximately 38% of the issued and outstanding Apergy common stock on a fully diluted basis.

Step 5: The Exchange Offer agent will distribute to ChampionX stockholders shares of Apergy common stock in the form of a book-entry authorization and cash in lieu of fractional shares (if any) in accordance with the terms of the Merger Agreement.

 

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Set forth below are diagrams that graphically illustrate, in simplified form, the existing corporate structure of the parties to the Transactions, the corporate structure of the parties immediately following the Distribution but before the Merger, and the final corporate structure immediately following the consummation of the Merger.

Existing Structure

 

 

LOGO

Structure Following the Separation and the Distribution but Before the Merger

 

 

LOGO

 

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Structure Following the Merger

 

LOGO

The Separation and the Distribution (See “The Transactions—The Separation and the Distribution” beginning on page 153)

The Separation

As part of the Separation and immediately prior to the Distribution, to the extent not previously effected pursuant to an internal restructuring, (a) Ecolab and certain Ecolab subsidiaries will transfer to ChampionX certain assets related to the ChampionX Business and certain liabilities related to the ChampionX Business, and (b) ChampionX and certain ChampionX subsidiaries will transfer to Ecolab or an Ecolab designee assets excluded from the ChampionX Business and liabilities excluded from the ChampionX Business, in order to separate the ChampionX Business from Ecolab’s other businesses prior to the Distribution.

The Distribution—Exchange Offer and Split-Off

On the closing date of the Merger, Ecolab will distribute 100% of the shares of ChampionX common stock to Ecolab stockholders participating in this Exchange Offer. In this Exchange Offer, Ecolab will offer its stockholders the option to exchange all or a portion of their shares of Ecolab common stock for shares of ChampionX common stock. In the event this Exchange Offer is not fully subscribed, Ecolab will distribute the remaining shares of ChampionX common stock owned by Ecolab in the clean-up spin-off on a pro-rata basis to Ecolab stockholders whose shares of Ecolab common stock remain outstanding after consummation of this Exchange Offer.

Any Ecolab stockholder who validly tenders (and does not properly withdraw) shares of Ecolab common stock that are accepted for exchange in this Exchange Offer will with respect to such shares waive their rights to receive, and forfeit any rights to, shares of ChampionX common stock distributed in the clean-up spin-off. If there is a clean-up spin-off, the Exchange Offer agent will calculate the exact number of shares of ChampionX common stock owned by Ecolab that will not be exchanged in this Exchange Offer and to be distributed on a pro rata basis, and the number of shares of Apergy common stock into which the remaining shares of ChampionX

 

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common stock will be converted in the Merger will be transferred to the relevant Ecolab stockholders (after giving effect to the consummation of this Exchange Offer) as promptly as practicable thereafter. If this Exchange Offer is terminated by Ecolab without the exchange of shares (but the conditions to consummation of the Transactions have otherwise been satisfied), Ecolab intends to distribute all shares of ChampionX common stock owned by Ecolab on a pro rata basis to holders of Ecolab common stock, with a record date to be announced by Ecolab.

The Exchange Offer agent will hold, for the account of the relevant Ecolab stockholders, the book-entry authorizations representing all of the outstanding shares of ChampionX common stock pending the consummation of the Merger. ChampionX common stock will not be traded during this period.

The Merger (See “The Transactions—The Merger” beginning on page 154)

Immediately after the Distribution, pursuant to and in accordance with the terms and conditions of the Merger Agreement, Merger Sub will merge with and into ChampionX whereby the separate corporate existence of Merger Sub will cease and ChampionX will survive the Merger as a wholly owned subsidiary of Apergy. After the Merger, Apergy will continue its existence as a separately traded public company, owning the combined businesses of Apergy and ChampionX.

The Merger Agreement provides that, at the effective time of the Merger, each issued and outstanding share of ChampionX common stock (except for shares of ChampionX common stock held by ChampionX, which shares will be canceled and cease to exist, and no consideration will be delivered in exchange therefor) will be converted into the right to receive a number of duly authorized, validly issued, fully paid and nonassessable shares of Apergy common stock equal to the Merger Exchange Ratio. The Merger Exchange Ratio is calculated under the Merger Agreement such that immediately following the Merger, ChampionX equityholders will own, in the aggregate, approximately 62% of the issued and outstanding Apergy common stock on a fully diluted basis and Apergy equityholders will own, in the aggregate, approximately 38% of the issued and outstanding Apergy common stock on a fully diluted basis. In addition, ChampionX will authorize the issuance of a number of shares of ChampionX common stock such that the total number of shares of ChampionX common stock outstanding immediately prior to the Distribution will be that number that results in the Merger Exchange Ratio equaling one. Apergy currently expects to issue approximately 127.6 million shares of Apergy common stock to ChampionX equityholders in connection with the Merger.

No fractional shares of Apergy common stock will be issued pursuant to the Merger. All fractional shares of Apergy common stock that a ChampionX stockholder would otherwise be entitled to receive as a result of the Merger (after such fractional shares are aggregated with all other fractional shares that would be issued to such holder) will be paid in cash the dollar amount (rounded to the nearest whole cent), after deducting any required withholding taxes, on a pro rata basis, without interest, determined by multiplying such fraction by the closing price of a share of Apergy common stock on the NYSE on the last business day prior to the date on which the Merger becomes effective.

Terms of This Exchange Offer (See “Exchange Offer—Terms of This Exchange Offer” beginning on page 68)

Ecolab is offering holders of shares of Ecolab common stock the opportunity to exchange their shares (or, for participants in the Ecolab Savings Plans, shares or units in respect of shares) for ChampionX common stock. You may tender all, some or none of your shares of Ecolab common stock. This prospectus and related documents are being sent to persons who directly held shares of Ecolab common stock on May 1, 2020 and brokers, banks and similar persons whose names or the names of whose nominees appear on Ecolab’s stockholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing for subsequent transmittal to beneficial owners of shares of Ecolab common stock. This prospectus and related documents are also being sent to participants in the Ecolab Savings Plans whose plan accounts were invested in Ecolab common stock on April 24, 2020, and also persons who acquired shares of Ecolab common stock through the Ecolab Stock Purchase Plan.

 

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Ecolab common stock validly tendered and not properly withdrawn will be accepted for exchange at the exchange ratio determined as described in “Exchange Offer—Terms of This Exchange Offer,” on the terms and subject to the conditions and limitations described below, including the proration provisions.

Ecolab will promptly return any shares of Ecolab common stock that are not accepted for exchange following the expiration of this Exchange Offer and the determination of the final proration factor, if any, described below. After the expiration of this Exchange Offer, shares accepted for exchange by Ecolab may not be withdrawn; provided, however, that such shares may be withdrawn at any time after the expiration of 40 business days from the commencement of this Exchange Offer if this Exchange Offer has not then been consummated.

For the purposes of illustration, the table below indicates the number of shares of ChampionX common stock that you would receive per share of Ecolab common stock you validly tender, calculated on the basis described in “Exchange Offer—Terms of This Exchange Offer” and taking into account the upper limit, assuming a range of averages of the daily VWAP of Ecolab common stock and Apergy common stock on the Valuation Dates. The first row of the table below shows the indicative calculated per-share value of Ecolab common stock, the indicative calculated per-share value of ChampionX common stock and the indicative exchange ratio that would have been in effect (and the corresponding indicative calculated value ratio) following the official close of trading on the NYSE on April 29, 2020 based on the daily VWAPs of Ecolab common stock and Apergy common stock on April 27, 2020, April 28, 2020, and April 29, 2020. The table also shows the effects of a 15% increase or decrease in either or both the calculated per-share value of Ecolab common stock and the calculated per-share value of ChampionX common stock based on changes relative to the values as of April 29, 2020.

 

Ecolab Common
Stock

  Apergy Common Stock   Calculated Per-
Share Value of
Ecolab Common
Stock

(A)
    Calculated Per-Share
Value of ChampionX
Common Stock
(Before the 10%
Discount)

(B)
    Shares of ChampionX
Common Stock To Be
Received Per Share of
Ecolab Common
Stock Tendered and
Accepted for
Exchange (the
Exchange Ratio)

(C)
    Calculated Value
Ratio

(D)
 

As of April 29, 2020

  As of April 29, 2020   $ 193.2828     $ 9.9294       21.6285       1.111  

Down 15%

  Up 15%   $ 164.2904     $ 11.4188       15.9863       1.111  

Down 15%

  Unchanged   $ 164.2904     $ 9.9294       18.3842       1.111  

Down 15%

  Down 15%   $ 164.2904     $ 8.4400       21.6285       1.111  

Unchanged

  Up 15%   $ 193.2828     $ 11.4188       18.8074       1.111  

Unchanged

  Down 15%(1)(2)   $ 193.2828     $ 8.4400       24.6667       1.077  

Up 15%

  Up 15%   $ 222.2752     $ 11.4188       21.6285       1.111  

Up 15%

  Unchanged(1)(3)   $ 222.2752     $ 9.9294       24.6667       1.102  

Up 15%

  Down 15%(1)(4)   $ 222.2752     $ 8.4400       24.6667       0.937  

 

(A)

As of April 29, 2020, the calculated per-share value of Ecolab common stock equals the simple arithmetic average of daily VWAPs on each of the three most recent prior trading dates ($185.2630, $196.6264 and $197.9590).

(B)

As of April 29, 2020, the calculated per-share value of ChampionX common stock equals the simple arithmetic average of daily Apergy VWAPs on each of the three most recent prior trading dates ($8.5170, $10.4585 and $10.8128).

(C)

Equal to (i) the amount calculated as [A / (B*(1-10%))] or (ii) the upper limit, whichever is less.

(D)

The calculated value ratio equals (i) the calculated per-share value of ChampionX common stock (B) multiplied by the exchange ratio (C), divided by (ii) the calculated per-share value of Ecolab common stock (A), rounded to three decimal places.

(1)

In this scenario, Ecolab would announce that the upper limit on the number of shares of ChampionX common stock that can be received for each share of Ecolab common stock tendered is in effect no later than 9:00 a.m., New York City time, on the second trading day prior to the expiration date, and that the exchange ratio will be fixed at the upper limit.

 

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(2)

In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 25.4453 shares of ChampionX common stock per share of Ecolab common stock validly tendered and accepted in this Exchange Offer.

(3)

In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 24.8728 shares of ChampionX common stock per share of Ecolab common stock validly tendered and accepted in this Exchange Offer.

(4)

In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 29.2621 shares of ChampionX common stock per share of Ecolab common stock validly tendered and accepted in this Exchange Offer. In this scenario, tendering Ecolab stockholders would receive less than $100 in value of ChampionX common stock for each $100 in value of Ecolab common stock.

For example, if the calculated per-share value of Ecolab common stock was $210.31 (the highest closing price for Ecolab common stock on the NYSE during the three-month period ending on the second to last full trading day prior to commencement of this Exchange Offer) and the calculated per-share value of ChampionX common stock was $3.02 (the lowest closing price for Apergy common stock on the NYSE during that three-month period), the value of ChampionX common stock, based on the Apergy common stock price, received for shares of Ecolab common stock accepted for exchange would be approximately $35 for each $100 of Ecolab common stock accepted for exchange.

Extension; Termination; Amendment

This Exchange Offer, and your withdrawal rights, will expire at 12:01 a.m., New York City time, on June 3, 2020, unless this Exchange Offer is extended or terminated. You must tender your shares of Ecolab common stock prior to this time if you want to participate in this Exchange Offer. Ecolab may extend, terminate or amend this Exchange Offer as described in this prospectus.

Any such extension, termination or amendment will be followed as promptly as practicable by public announcement thereof by Ecolab, which, in the case of an extension, will be made no later than 9:00 a.m., New York City time, on the next business day after the previously-scheduled expiration date.

Conditions to Consummation of This Exchange Offer

Ecolab’s obligation to exchange shares of ChampionX common stock for shares of Ecolab common stock is subject to the conditions listed under “Exchange Offer—Conditions to Consummation of This Exchange Offer,” including the satisfaction of conditions to the Transactions and other conditions. These conditions include:

 

   

the absence of a market disruption event (as defined herein);

 

   

the approval by Apergy’s stockholders of the issuance of Apergy common stock in connection with the Merger;

 

   

the registration statement on Forms S-4 and S-1 of ChampionX having become effective under the Securities Act;

 

   

the receipt by Ecolab of the Distribution Tax Opinion, the Merger Tax Opinion and the KPMG Tax Opinion (as defined below);

 

   

the completion of various transaction steps (including the Contribution and receipt of the Cash Payment);

 

   

each of the conditions to the obligation of the parties to the Merger Agreement to consummate the Merger (other than this Exchange Offer) and effect the other transactions contemplated by the Merger Agreement having been satisfied or waived (other than those conditions that by their nature are to be satisfied contemporaneously with the Distribution and/or the Merger); and

 

   

other customary conditions.

 

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For a description of the material conditions precedent to the Transactions, see “The Transaction Agreements—The Merger Agreement—Conditions to the Merger” and “The Transaction Agreements—The Separation Agreement—Conditions to the Distribution.”

Ecolab may waive any of the conditions to this Exchange Offer prior to the expiration of this Exchange Offer. ChampionX has no right to waive any of the conditions to this Exchange Offer. Apergy has no right to waive any of the conditions to this Exchange Offer (however, Apergy does have the right to waive certain conditions relating to the Merger).

Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of Ecolab Common Stock

If, upon the expiration of this Exchange Offer, Ecolab stockholders have validly tendered more shares of Ecolab common stock than Ecolab is able to accept for exchange (taking into account the exchange ratio and the total number of shares of ChampionX common stock being exchanged by Ecolab in this Exchange Offer), Ecolab will accept for exchange the shares of Ecolab common stock validly tendered and not properly withdrawn by each tendering stockholder on a pro rata basis, based on the proportion that the total number of shares of Ecolab common stock to be accepted for exchange bears to the total number of shares of Ecolab common stock validly tendered and not properly withdrawn (rounded to the nearest whole number of shares of Ecolab common stock, and subject to any adjustment necessary to ensure the exchange of all shares of ChampionX common stock owned by Ecolab), except for tenders of odd lots, as described below.

Ecolab will announce the preliminary proration factor for this Exchange Offer at http://www.championxexchangeoffer.com and separately by press release promptly after the expiration of this Exchange Offer. Upon determining the number of shares of Ecolab common stock validly tendered for exchange and not properly withdrawn, Ecolab will announce the final results of this Exchange Offer, including the final proration factor for this Exchange Offer.

Beneficial holders (other than participants in any of the Ecolab Savings Plans) of less than 100 shares of Ecolab common stock who validly tender all of their shares may elect not to be subject to proration by completing the section in the applicable letter of transmittal entitled “Proration / Odd-Lot.” If your odd-lot shares are held by a broker for your account, you can contact the broker and request this preferential treatment. All of your odd-lot shares will be accepted for exchange without proration if Ecolab completes this Exchange Offer.

Fractional Shares

Fractional shares of ChampionX common stock will be issued in the Distribution. ChampionX common stock (including the fractional shares) will be held by the Exchange Offer agent for the benefit of Ecolab stockholders whose shares of Ecolab common stock are accepted for exchange in this Exchange Offer and, if this Exchange Offer is completed but not fully subscribed, for distribution in the clean-up spin-off. If this Exchange Offer is terminated by Ecolab without the exchange of shares (but the conditions to consummation of the Transactions have otherwise been satisfied), Ecolab intends to distribute all shares (including the fractional shares) of ChampionX common stock owned by Ecolab on a pro rata basis to holders of Ecolab common stock, with a record date to be announced by Ecolab. In the Merger, no fractional shares of Apergy common stock will be delivered to holders of shares of ChampionX common stock. Instead, holders of shares of ChampionX common stock who would otherwise be entitled to receive a fractional share of Apergy common stock will receive in cash the dollar amount (rounded to the nearest whole cent) determined by multiplying such fraction by the closing price of Apergy common stock on the NYSE on the last business day prior to the effective time of the Merger. The amount received by such holders of shares of ChampionX common stock will be net of any required withholding taxes.

Holders who are tendering shares of Ecolab common stock (or units in respect of shares of Ecolab common stock) allocated to their Ecolab Savings Plans and Ecolab Stock Purchase Plan accounts should refer to the

 

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special instructions provided to them by or on behalf of their applicable plan administrator for information that is specific to the Ecolab Savings Plans and the Ecolab Stock Purchase Plan.

Procedures for Tendering

For you to validly tender your shares of Ecolab common stock pursuant to this Exchange Offer, prior to the expiration of this Exchange Offer:

 

   

If you hold certificates representing shares of Ecolab common stock, you must deliver to the Exchange Offer agent at the applicable address provided on the back cover of this prospectus, a properly completed and duly executed letter of transmittal, along with any required signature guarantees and any other required documents and the certificates representing the shares of Ecolab common stock validly tendered.

 

   

If you hold DRS shares of Ecolab common stock, you must deliver to the Exchange Offer agent pursuant to one of the methods set forth in the letter of transmittal, a properly completed and duly executed letter of transmittal, along with any required signature guarantees and any other required documents. Since certificates are not issued for DRS shares, you do not need to deliver any certificates representing those shares to the Exchange Offer agent.

 

   

If you hold shares of Ecolab common stock through a bank, broker or other nominee, you should receive instructions from your broker on how to participate in this Exchange Offer. In this situation, do not complete a letter of transmittal to tender your Ecolab common stock. Please contact your broker directly if you have not yet received instructions. Some financial institutions may also effect tenders by book-entry transfer through The Depository Trust Company.

 

   

Participants in the Ecolab Savings Plans and the Ecolab Stock Purchase Plan should follow the special instructions that are being sent to them by or on behalf of their applicable plan administrator. Such participants should not use the letter of transmittal to direct the tender of shares of Ecolab common stock (or units in respect of shares of Ecolab common stock) held in these plans, but should instead use the Exchange Offer election form provided to them by or on behalf of their plan administrator. Such participants may direct the applicable plan trustee to tender all, some or none of the shares of Ecolab common stock (or units in respect of shares of Ecolab common stock) allocated to their Ecolab Savings Plans and Ecolab Stock Purchase Plan accounts, subject to any limitations set forth in the special instructions provided to them, by the deadline specified in the special instructions sent by or on behalf of the applicable plan administrator.

Delivery of ChampionX Common Stock

Upon consummation of this Exchange Offer, Ecolab will deliver to the Exchange Offer agent a book-entry authorization representing (a) all of the shares of ChampionX common stock being exchanged in this Exchange Offer, with instructions to hold the shares of ChampionX common stock as agent for the holders of shares of Ecolab common stock validly tendered and not properly withdrawn in this Exchange Offer whose shares are accepted in this Exchange Offer and (b) in the case of a clean-up spin-off, if any, Ecolab stockholders whose shares of Ecolab common stock remain outstanding after the consummation of this Exchange Offer. Shares of Apergy common stock will be delivered following the effectiveness of the Merger, pursuant to the procedures determined by the Exchange Offer agent. See “Exchange Offer—Terms of This Exchange Offer—Exchange of Shares of Ecolab Common Stock.”

Withdrawal Rights

Shares of Ecolab common stock validly tendered pursuant to this Exchange Offer may be withdrawn at any time before 12:01 a.m., New York City time, on the expiration date by following the procedures described herein. If you change your mind again, you may re-tender your Ecolab common stock by again following the procedures for this Exchange Offer prior to the expiration of this Exchange Offer.

 

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If you hold shares of Ecolab common stock (or units in respect of shares of Ecolab common stock) through the Ecolab Savings Plans or the Ecolab Stock Purchase Plan, you will be provided with special instructions by or on behalf of your plan administrator on how to withdraw your shares (or units in respect of shares) and you must deliver any required information in a timely manner in order for the tabulator for the Ecolab Savings Plans and the agent for the Ecolab Stock Purchase Plan to withdraw your election to exchange from the final tabulation. The deadline will be specified in the special instructions provided to you (or, if this Exchange Offer is extended, any new withdrawal deadline established by the plan administrator).

No Appraisal Rights

No appraisal rights are available to holders of Ecolab common stock in connection with this Exchange Offer or any clean-up spin-off (in the event this Exchange Offer is not fully subscribed) of shares of ChampionX common stock. If this Exchange Offer were to be terminated by Ecolab without the exchange of shares (but the conditions to consummation of the Transactions have otherwise been satisfied), no appraisal rights would be available to holders of Ecolab common stock in the spin-off of shares of ChampionX common stock.

Distribution of ChampionX Common Stock Remaining After This Exchange Offer

In the event this Exchange Offer is not fully subscribed, all shares of ChampionX common stock owned by Ecolab that are not exchanged in this Exchange Offer will be distributed in the clean-up spin-off to holders of Ecolab common stock whose shares of Ecolab common stock remain outstanding after the consummation of this Exchange Offer. The record date for the clean-up spin-off, if any, will be announced by Ecolab. Any Ecolab stockholder who validly tenders (and does not properly withdraw) shares of Ecolab common stock that are accepted in this Exchange Offer will with respect to such shares waive their rights to receive, and forfeit any rights to, shares of ChampionX common stock distributed in the clean-up spin-off.

If this Exchange Offer is consummated, the Exchange Offer agent will calculate the exact number of shares of ChampionX common stock not exchanged in this Exchange Offer to be distributed in the clean-up spin-off, and that number of shares of ChampionX common stock will be held as agent for holders of Ecolab common stock entitled thereto.

If this Exchange Offer is terminated by Ecolab without the exchange of shares, but the conditions to consummation of the Transactions have otherwise been satisfied, Ecolab intends to distribute all shares of ChampionX common stock owned by Ecolab on a pro rata basis to holders of Ecolab common stock, with a record date to be announced by Ecolab.

Legal Limitations; Certain Matters Relating to Non-U.S. Jurisdictions

This prospectus is not an offer to buy, sell or exchange and it is not a solicitation of an offer to buy, sell or exchange any shares of ChampionX common stock, shares of Ecolab common stock or shares of Apergy common stock in any jurisdiction in which the offer, sale or exchange is not permitted. After the consummation of this Exchange Offer and prior to the Merger, it will not be possible to trade the ChampionX common stock. Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. None of Ecolab, Apergy or ChampionX has taken any action under non-U.S. regulations to facilitate a public offer to exchange the shares of Ecolab common stock, Apergy common stock or ChampionX common stock outside the United States. Accordingly, the ability of any non-U.S. person to tender shares of Ecolab common stock in this Exchange Offer will depend on whether there is an exemption available under the laws of such person’s home country that would permit the person to participate in this Exchange Offer without the need for Ecolab, Apergy or ChampionX to take any action to facilitate a public offering in that country or otherwise. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors.

 

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Non-U.S. stockholders should consult their advisors in considering whether they may participate in this Exchange Offer in accordance with the laws of their home countries and, if they participate, whether there are any restrictions or limitations on transactions in the shares of Ecolab common stock, Apergy common stock or ChampionX common stock that may apply in their home countries. None of Ecolab, Apergy or ChampionX can provide any assurance about whether such limitations may exist. See “Exchange Offer—Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on this Exchange Offer outside the United States.

Risk Factors

In deciding whether to tender your shares of Ecolab common stock in this Exchange Offer, you should carefully consider the matters described in the section entitled “Risk Factors,” as well as other information included in this prospectus and the other documents to which you have been referred.

Debt Financing (See “Additional Agreements Related to the Separation, the Distribution and the Merger—Apergy Credit Facility and—ChampionX Credit Facility” beginning on page 217)

In connection with the Transactions, ChampionX will enter into a credit agreement with respect to a $537 million senior secured term loan credit facility to finance the Cash Payment to Ecolab and otherwise pay certain expenses in connection with the Transactions. Also, in connection with the Transactions, Apergy has entered into an amendment to its existing credit agreement to, among other things, increase its revolving commitments thereunder by a principal amount up to $150 million.

Board of Directors and Management of Apergy After the Merger (See “The Transactions—Board of Directors and Executive Officers of Apergy Following the Merger; Operations Following the Merger” beginning on page 184)

After the Merger, the Apergy Board of Directors will consist of nine directors: the seven current directors on the Apergy Board of Directors and two directors designated by Ecolab. One of the Ecolab board designees shall be appointed as a Class I director of Apergy, and the second of the Ecolab board designees shall be appointed as a Class II director of Apergy. Each of the directors designated by Ecolab must qualify as an independent director, as such term is defined in NYSE Rule 303A.02.

Apergy’s current President and Chief Executive Officer, Sivasankaran Somasundaram, and current Senior Vice President and Chief Financial Officer, Jay A. Nutt, will continue in their roles. Deric Bryant, current Executive Vice President & President of Ecolab’s ChampionX Business, is expected to serve as Chief Operating Officer of the combined company. Certain members of the ChampionX management team are expected to join the Apergy management team as well.

Interests of Certain Persons in the Transactions (See “The Transactions—Interests of Certain Persons in the Transactions” beginning on page 185)

The directors and executive officers of Ecolab and ChampionX will receive no extra or special benefit that is not shared on a pro rata basis by all other ChampionX stockholders in connection with the Transactions, except as described herein. None of Ecolab’s or ChampionX’s directors will receive any severance or other additional compensation as a result of the Transactions. Certain of Ecolab’s and ChampionX’s executive officers have financial interests in the Transactions that may be different from, or in addition to, the interests of stockholders generally. As with all Ecolab stockholders, if a director or executive officer of Ecolab or ChampionX owns shares of Ecolab common stock, such person may participate in this Exchange Offer on the same terms as other Ecolab stockholders. As of April 24, 2020, Ecolab’s directors and executive officers beneficially owned approximately 1.30% of the outstanding shares of Ecolab common stock. All of ChampionX’s outstanding common stock is currently owned directly by Ecolab.

 

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Certain of Apergy’s executive officers have financial interests in the Transactions that may be different from, or in addition to, the interests of Apergy’s stockholders generally. The members of the Apergy Board of Directors were aware of and considered these interests, among other matters, in reaching the determination to approve the terms of the Transactions, including the Share Issuance and the Merger, and in recommending to Apergy’s stockholders that they vote to approve the Share Issuance. As of April 23, 2020, Apergy’s directors and executive officers beneficially owned approximately 0.66% of the outstanding shares of Apergy’s common stock.

Apergys Stockholders Meeting (See “The Transactions—Apergy’s Stockholders Meeting” on page 190)

Under the terms of the Merger Agreement, Apergy is required to call a meeting of its stockholders for the purpose of voting upon the issuance of shares of Apergy’s common stock in the Merger as promptly as reasonably practicable following the date on which the SEC has cleared Apergy’s proxy statement and, if required by the SEC as a condition to the mailing of Apergy’s proxy statement, the registration statement of Apergy has been declared effective. Apergy will ask its stockholders to vote on this matter at the special meeting of Apergy stockholders by delivering Apergy’s proxy statement to its stockholders in accordance with applicable law and its organizational documents. In accordance with NYSE Listing Rules, the DGCL, and Apergy’s organizational documents, the approval of the Share Issuance Proposal requires the affirmative vote of the holders of a majority of the voting power of Apergy present online or represented by proxy and entitled to vote on such matter, at a special meeting at which a quorum is present.

As of April 23, 2020, Apergy directors and executive officers and their affiliates were entitled to vote approximately 0.66% of the outstanding shares of Apergy common stock. Apergy currently expects that all Apergy directors and executive officers will vote their shares in favor of the Share Issuance Proposal, though none has entered into an agreement requiring them to do so.

As of April 28, 2020, ChampionX’s directors, executive officers and their affiliates were entitled to vote less than 0.01% of the outstanding shares of Apergy common stock. No vote of Ecolab stockholders is required in connection with the Transactions, and the only vote required with respect to ChampionX is by Ecolab as its sole stockholder, which stockholder approval has been obtained. No directors, executive officers or affiliates of ChampionX or Ecolab will have voting rights in connection with the Transactions with respect to their ownership of any Ecolab common stock or ChampionX common stock.

Accounting Treatment of the Merger (See “The Transactions—Accounting Treatment of the Merger” beginning on page 191)

Accounting Standards Codification Topic 805, Business Combinations, or ASC 805, requires the use of the acquisition method of accounting for business combinations. In applying the acquisition method, it is necessary to identify both the accounting acquiree and the accounting acquirer. In a business combination effected through an exchange of equity interests, such as the Merger, the entity that issues the interests (Apergy in this case) is generally the accounting acquirer; however, all pertinent facts and circumstances must be considered, including the following additional considerations:

 

   

The composition of the governing body of the combined company: from the effective time of the Merger, the combined company will operate under the oversight of the Board of Directors which consists of nine members (the current seven Apergy directors and two additional members that will be nominated by Ecolab). The combined company’s Board of Directors will be headed by Apergy’s current Chairman and will continue to be a classified board with three classes of directors until Apergy’s Annual Meeting of Stockholders held in 2022, in accordance with Apergy’s organizational documents. In 2020, two members will be up for reelection, and in 2021, three members will be up for re-election.

 

   

The composition of the senior management of the combined company: Apergy expects that existing Apergy management will hold the majority of the key executive positions including the Chief Executive Officer and the Chief Financial Officer.

 

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Apergy’s management has determined that Apergy represents the accounting acquirer in this combination based on an analysis of the criteria outlined in ASC 805 and the facts and circumstances specific to this transaction. As a result, Apergy will record the business combination in its financial statements and will apply the acquisition method to account for the acquired assets and assumed liabilities of the ChampionX Business upon consummation of the Merger. Applying the acquisition method includes recording the identifiable assets acquired and liabilities assumed at their fair values, and recording goodwill for the excess of the purchase price over the aggregate fair value of the identifiable assets acquired and liabilities assumed.

U.S. Federal Income Tax Consequences of the Distribution and the Merger (See “U.S. Federal Income Tax Consequences of the Distribution and the Merger” beginning on page 247)

Ecolab stockholders are generally not expected to recognize any gain or loss as a result of the Distribution or the Merger, except for any gain or loss attributable to the receipt of cash in lieu of a fractional share of Apergy common stock pursuant to the Merger. Ecolab is generally not expected to recognize any gain or loss as a result of the Distribution or the Merger.

Regulatory Approvals (See “The Transactions—Regulatory Approvals” beginning on page 191)

Under the HSR Act and related rules, the Merger may not be completed until the parties have filed notification and report forms with the Antitrust Division of the U.S. Department of Justice and the United States Federal Trade Commission, and observed a specified statutory waiting period. Apergy and Ecolab filed the requisite notification and report forms on January 3, 2020 and the parties were granted early termination of the waiting period under the HSR Act on January 13, 2020.

Additionally, Apergy and Ecolab have agreed to seek regulatory approvals in Canada, Azerbaijan, Nigeria, Kazakhstan, Saudi Arabia, Mexico and Russia. The approvals in the jurisdictions that are conditions to closing this Exchange Offer have been obtained.

 

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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

The following summary combined financial information of ChampionX and summary consolidated financial information of Ecolab and Apergy are being provided to help you in your analysis of the financial aspects of the Transactions. You should read this information in conjunction with the financial information included elsewhere and incorporated by reference into this prospectus. See “Where You Can Find Additional Information; Incorporation by Reference,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of ChampionX,” “Information About the ChampionX Business,” “Information About Ecolab,” “Information About Apergy,” “Selected Historical Combined Financial Information of ChampionX,” “Selected Historical Consolidated Financial Information of Ecolab” and “Selected Historical Condensed Consolidated Financial Information of Apergy.”

Summary Historical Combined Financial Information of ChampionX

The summary historical combined financial information presented in the table below consists of historical combined financial information of ChampionX as of the dates and for the periods presented. The summary historical combined financial information as of December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017 have been derived from ChampionX’s audited combined financial statements included elsewhere in this prospectus. The summary historical combined financial information as of December 31, 2017 has been derived from ChampionX’s audited combined financial statements that are not included or incorporated by reference in this prospectus.

The summary historical combined financial information includes costs of ChampionX’s business, which include the allocation of certain corporate expenses from Ecolab. ChampionX believes these allocations were made on a reasonable basis. The summary historical combined financial information may not be indicative of ChampionX’s future performance. The summary historical combined financial information should be read in conjunction with “Selected Historical Combined Financial Information of ChampionX,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of ChampionX” and the ChampionX audited historical combined financial statements and accompanying notes included elsewhere in this prospectus.

 

     December 31,  
(in millions)    2019      2018      2017  

Year ended:

        

Net sales

   $ 2,332.0      $ 2,431.5      $ 2,290.0  

Operating income

     155.4        117.5        88.3  

Net income attributable to ChampionX

     133.4        102.2        167.1  

EBITDA(1)

     373.1        350.5        318.4  

Adjusted EBITDA(1)

     382.1        366.6        342.5  

As of:

        

Total assets

   $ 4,301.1      $ 4,353.6      $ 4,519.1  

Long-term debt (excluding portions due within one year)

     0.3        0.1        0.1  

 

(1)

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of ChampionX—Non-GAAP Financial Measures” elsewhere in this prospectus for additional information on ChampionX’s use of non-GAAP measures. EBITDA and adjusted EBITDA are non-GAAP financial measures. EBITDA is defined as net income including noncontrolling interest excluding income tax expense (benefit), interest (income) expense, net, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding special (gains) and charges, net. A reconciliation of EBITDA and adjusted EBITDA to their most comparable GAAP measure for the periods presented above is as follows:

 

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     Year Ended December 31,  
(in millions)    2019(a)     2018(b)      2017(c)  

Net income including noncontrolling interest

   $ 141.1     $ 103.7      $ 169.3  

Income tax expense (benefit)

     31.2       35.5        (61.9

Interest (income) expense, net

     (0.9     —        —  

Depreciation

     88.4       88.0        87.6  

Amortization

     113.3       123.3        123.4  
  

 

 

   

 

 

    

 

 

 

EBITDA

     373.1       350.5        318.4  

Special (gains) and charges, net

     9.0       16.1        24.1  
  

 

 

   

 

 

    

 

 

 

Adjusted EBITDA

   $ 382.1     $ 366.6      $ 342.5  
  

 

 

   

 

 

    

 

 

 

 

(a)

Special (gains) and charges, net, in the year ended December 31, 2019 included net restructuring charges of $18.0 million, a gain of $9.5 million for costs recovered from a dispute related to a contract terminated in 2017 and other charges of $0.5 million.

(b)

Special (gains) and charges, net, in the year ended December 31, 2018 included net restructuring charges of $14.8 million and other charges of $1.3 million.

(c)

Special (gains) and charges, net, in the year ended December 31, 2017 included a fixed asset impairment of $16.0 million, a contract termination charge of $11.1 million, net restructuring charges of $6.6 million, a gain of $8.7 million from U.S. dollar cash recoveries of intercompany receivables written off when Venezuelan subsidiaries were deconsolidated and other gains of $0.9 million.

Summary Historical Consolidated Financial Information of Ecolab

The following table presents the summary historical consolidated financial information of Ecolab. The summary historical consolidated financial information of Ecolab for the years ended December 31, 2019, 2018 and 2017, and as of December 31, 2019 and 2018 have been derived from Ecolab’s audited consolidated financial statements and related notes contained in the Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference in this prospectus. The summary historical consolidated financial information as of December 31, 2017 has been derived from Ecolab’s audited consolidated financial statements that are not included and not incorporated by reference in this prospectus. The summary historical consolidated financial information presented below should be read in conjunction with the audited financial statements and the accompanying notes and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section contained in Ecolab’s annual report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference into this prospectus. For more information, see the section entitled “Where You Can Find Additional Information; Incorporation by Reference.”

 

     December 31,  
(in millions, except per share amounts)    2019(1)     2018(2)      2017(3)  

Year ended:

       

Net sales

   $ 14,906.3     $ 14,668.2      $ 13,835.9  

Operating income

     2,013.8       1,947.0        1, 950.1  

Net income attributable to Ecolab

     1,558.9       1,429.1        1,504.6  

Basic earnings per share

     5.41       4.95        5.20  

Diluted earnings per share, as reported (U.S. GAAP)

     5.33       4.88        5.12  

Cash dividends declared per common share

     1.85       1.69        1.52  

Diluted earnings per share, as reported (U.S. GAAP)

   $ 5.33     $ 4.88      $ 5.12  

Adjustments:

       

Special (gains) and charges

     0.69       0.35        0.19  

Discrete tax expense (benefits)

     (0.20     0.02        (0.63
  

 

 

   

 

 

    

 

 

 

Adjusted diluted earnings per share (Non-GAAP)

   $ 5.82     $ 5.25      $ 4.68  
  

 

 

   

 

 

    

 

 

 

As of:

       

Total assets

   $ 20,869.1     $ 20,074.5      $ 19,963.5  

Long-term debt (excluding portions due within one year)

     5,973.5       6,301.6        6,758.3  

 

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(1)

Special (gains) and charges for 2019 include the following charges net of tax, net restructuring charges of $106.6 million, ChampionX separation charges of $71.5 million, acquisition and integration charges of $9.9 million and litigation and other charges of $7.5 million.

 

    

Discrete tax expense (benefits) for 2019 include benefits associated with stock compensation excess tax benefits of $43.1 million, favorable adjustments to the estimate for U.S. tax reform one-time repatriation tax benefit of $3.1 million and other tax net benefits of $12.5 million.

 

(2)

Special (gains) and charges for 2018 include the following charges, net of tax: a commitment to the Ecolab Foundation of $18.9 million, net restructuring charges of $77.2 million, acquisition and integration of $5.7 million and litigation and other charges of $1.0 million.

 

    

Discrete tax expense (benefits) for 2018 include adjustments to the estimate for U.S. tax reform one-time repatriation tax expense of $66.0 million, benefits associated with stock compensation excess tax benefits of $28.1 million, a favorable adjustment related to changes in estimates and an Internal Revenue Service approved method change in the filed U.S. federal tax return of $39.9 million and other tax expense of $6.7 million.

 

(3)

Special (gains) and charges for 2017 include the following charges, net of tax: acquisition and integration charges of $18.5 million, net restructuring charges of $32.4 million, charges related to a vendor contract termination in Ecolab’s Global Energy segment of $14.4 million and charges on extinguished debt of $13.6 million. Gains, net of tax, include gain on the sale of Ecolab’s Equipment Care business of $12.4 million, tax benefits on the repatriation of cash to the U.S. of $7.8 million and a net gain of $2.7 million from other activity.

 

    

Discrete tax expense (benefits) for 2017 include a net benefit of $158.9 million for repricing of U.S. deferred tax positions to the U.S. tax reform rate, offset by a one-time repatriation tax on foreign earnings and stock compensation excess tax benefits of $39.6 million. Expenses include recognizing adjustments from filing the 2016 U.S. federal income tax return and release of uncertain tax positions totaling $14.3 million.

Summary Historical Consolidated Financial Information of Apergy

The summary historical consolidated financial information of Apergy for the years ended December 31, 2019, 2018 and 2017, and as of December 31, 2019 and 2018 have been derived from Apergy’s audited consolidated financial statements and related notes contained in the Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference in this prospectus. The summary historical consolidated financial information as of December 31, 2017 has been derived from Apergy’s audited consolidated financial statements that are not included or incorporated by reference in this prospectus. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Apergy or the combined company, and you should read the following information together with Apergy’s audited consolidated financial statements, the related notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Apergy’s Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference in this prospectus. For more information, see “Where You Can Find Additional Information; Incorporation by Reference” beginning on page 258 of this prospectus.

 

     Years Ended December 31,  
(in thousands, except per share data)    2019      2018      2017  

Statements of Income

        

Total revenue

   $ 1,131,251      $ 1,218,156      $ 1,010,466  

Income before income taxes

     59,186        121,353        88,355  

Net income attributable to Apergy

     52,164        92,737        109,589  

Earnings per share attributable to Apergy:

        

Basic

   $ 0.67      $ 1.20      $ 1.42  

Diluted

   $ 0.67      $ 1.19      $ 1.41  

 

 

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     As of December 31,  
(in thousands)    2019      2018      2017  

Balance Sheets

        

Total assets

   $ 1,922,825      $ 1,973,116      $ 1,906,408  

Long-term debt

     559,821        663,207        5,806  

Total equity

     1,036,214        975,983        1,635,509  

Summary Unaudited Pro Forma Condensed Consolidated Financial Information of Ecolab

The summary unaudited pro forma condensed consolidated financial information of Ecolab has been prepared to reflect the Transactions as described in “Unaudited Pro Forma Condensed Consolidated Financial Statements of Ecolab.” The summary unaudited pro forma condensed consolidated financial information as of December 31, 2019 has been prepared to reflect the Transactions as if they had occurred on December 31, 2019. The summary unaudited pro forma condensed consolidated financial information for the year ended December 31, 2019 has been prepared to reflect the Transactions as if they had occurred on January 1, 2019.

The summary unaudited pro forma condensed consolidated financial information of Ecolab should be read in conjunction with “Selected Historical Combined Financial Information of ChampionX,” “Selected Historical Consolidated Financial Information of Ecolab,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of ChampionX,” “Unaudited Pro Forma Condensed Consolidated Financial Statements of Ecolab,” the ChampionX historical audited combined financial statements and accompanying notes, and the Ecolab historical audited consolidated financial statements, accompanying notes, and management’s discussion and analysis of financial condition and results of operations, included elsewhere in or incorporated by reference in this prospectus. The summary unaudited pro forma condensed consolidated financial information of Ecolab does not purport to represent what the actual results of operations or the financial position of Ecolab would have been had the Transactions occurred on the dates assumed, nor is it indicative of the future results of operations or financial position of Ecolab.

 

     December 31, 2019  
(in millions, except per share amounts)    Historical      Adjustments     Pro Forma  

Year ended:

       

Net sales

   $ 14,906.3      $ (2,342.5   $ 12,563.8  

Operating income

     2,013.8        (167.7     1,846.1  

Net income attributable to Ecolab

     1,558.9        (132.5     1,426.4  

Basic earnings per share

     5.41        (0.37     5.04  

Diluted earnings per share, as reported (U.S. GAAP)

     5.33        (0.37     4.96  

Adjusted diluted earnings per share (non-GAAP)(1)

     5.82        (0.63     5.19  

As of:

       

Total assets

   $ 20,869.1      $ (3,749.6   $ 17,119.5  

Long-term debt (excluding portions due within one year)

     5,973.5        (0.3     5,973.2  

 

(1)

Please read “Non-GAAP Pro Forma Information” elsewhere in this prospectus for a reconciliation of this non-GAAP measure to its most closely-related GAAP measure. For further information on Ecolab’s use of non-GAAP financial measures, please read the “—Non-GAAP Financial Measures” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Ecolab’s Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference in this prospectus.

 

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Summary Unaudited Pro Forma Combined Financial Information of Apergy

The summary unaudited pro forma combined financial information of Apergy has been prepared by Apergy to reflect the Transactions described in the “Unaudited Pro Forma Condensed Combined Financial Statements of Apergy.” The summary unaudited pro forma combined balance sheet as of December 31, 2019 has been prepared to reflect the Transactions as if they had occurred on December 31, 2019. The summary unaudited pro forma combined statement of income for the year ended December 31, 2019 has been prepared to reflect the Transactions as if they had occurred on January 1, 2019.

The summary historical combined financial information includes costs of ChampionX’s business, which include the allocation of certain corporate expenses from Ecolab. ChampionX believes these allocations were made on a reasonable basis. The summary unaudited pro forma combined financial information of Apergy should be read in conjunction with “Selected Historical Combined Financial Information of ChampionX,” “Selected Historical Consolidated Financial Information of Apergy,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of ChampionX,” “Unaudited Pro Forma Condensed Combined Financial Statements of Apergy,” the ChampionX historical combined financial statements and accompanying notes and the Apergy historical consolidated financial statements, accompanying notes, and management’s discussion and analysis of financial condition and results of operations, included elsewhere in or incorporated by reference in this prospectus. The summary unaudited pro forma combined financial information does not purport to represent what the actual results of operations or the financial position of the combined company would have been had the Transactions occurred on the dates assumed, nor are they indicative of future results of operations or financial position of the combined company.

 

(in thousands, except per share data)

   Year Ended
December 31, 2019
 

Pro Forma Combined Statements of Income:

  

Total revenues

   $ 3,456,354  

Cost of goods and services

     2,434,074  

Gross profit

     1,022,280  

Income before income taxes

     327,359  

Provision for income taxes

     60,574  

Net income

     266,785  

Net income attributable to stockholders

     258,569  

Earnings per share attributable to stockholders

  

Basic

   $ 1.26  

Diluted

   $ 1.26  

Weighted-average shares outstanding

  

Basic

     205,023  

Diluted

     205,220  

 

(in thousands)

   As of
December 31, 2019
 

Pro Forma Condensed Combined Balance Sheet:

  

Cash and equivalents

   $ 80,290  

Total assets

     4,023,851  

Long-term debt

     1,096,821  

Total liabilities

     1,980,077  

Noncontrolling interests

     6,064  

Total equity

     2,043,774  

Summary Historical and Pro Forma Per Share Information

The following tables set forth certain historical and pro forma per share information for Ecolab and Apergy. The Ecolab historical information has been derived from and should be read together with Ecolab’s audited

 

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consolidated financial statements and accompanying notes contained in Ecolab’s Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference into this prospectus. The Apergy historical information has been derived from and should be read together with Apergy’s audited consolidated financial statements and accompanying notes contained in Apergy’s Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference into this prospectus. Ecolab’s pro forma information has been derived from the “Unaudited Pro Forma Condensed Consolidated Financial Statements of Ecolab” included elsewhere in this prospectus. Apergy’s pro forma information has been derived from the “Unaudited Pro Forma Condensed Combined Financial Statements of Apergy” included elsewhere in this prospectus.

Ecolab, Apergy and ChampionX may have performed differently had the Transactions occurred prior to the period or as of the date presented. The pro forma per share information does not purport to represent what the actual results of operations or the financial position would have been had the Transactions occurred on the dates assumed, nor is it indicative of the future results of operations or financial position of Ecolab, Apergy and ChampionX following the Transactions.

Ecolab

 

     As of and for the Year Ended
December 31, 2019
 

(in millions, except per share amounts)

   Historical      Pro Forma  

Earnings attributable to Ecolab per common share

     

Basic

   $ 5.41      $ 5.04  

Diluted

   $ 5.33      $ 4.96  

Weighted-average common shares outstanding

     

Basic

     288.1        283.0  

Diluted

     292.5        287.4  

Book value per share of common stock

   $ 30.26      $ 19.93  

Cash dividends declared per share of common stock

   $ 1.85      $ 1.85  

Apergy

 

     As of and for the Year Ended
December 31, 2019
 

(in millions, except per share amounts)

   Historical      Pro Forma  

Earnings attributable to Apergy per common share

     

Basic

   $ 0.67      $ 1.26  

Diluted

   $ 0.67      $ 1.26  

Weighted-average common shares outstanding

     

Basic

     77.4        205.0  

Diluted

     77.6        205.2  

Book value per share of common stock

   $ 13.38      $ 9.96  

Cash dividends declared per share of common stock

   $      $  

ChampionX equivalent pro forma per share information under varying exchange rate assumptions

The unaudited pro forma per share information assumes that the Transactions are effected through a fully subscribed exchange offer with approximately 5.1 million shares of Ecolab common stock tendered and exchanged for approximately 122.0 million shares of ChampionX common stock, reflecting an assumed exchange ratio of 23.9627 shares of ChampionX common stock for each share of Ecolab common stock

 

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exchanged. Such exchange ratio has been determined by applying an indicative assumed discount of 10% and dividing the closing price of Ecolab’s common stock of $180.08 per share as of April 24, 2020 by 90% of the closing price of Apergy common stock of $8.35 per share as of April 24, 2020. Note the actual exchange ratio of Ecolab common stock to ChampionX common stock will be based on a calculated VWAP upon the terms and conditions disclosed elsewhere in this prospectus. The range of equivalent pro forma per share information as of and for the year ended December 31, 2019 shown below is calculated by multiplying the Apergy pro forma per share amounts by the exchange ratio based on varying exchange outcomes of ChampionX common stock for each share of Ecolab common stock tendered in this Exchange Offer.

 

Ecolab Common Stock   Apergy Common Stock   Exchange Ratio     Calculated
basic earnings
per common
share
    Calculated
diluted
earnings per
common share
    Calculated
book value per
share of
common stock
    Cash dividends
declared per
share of
common stock
 

As of April 24, 2020

  As of April 24, 2020     23.9627     $ 30.22     $ 30.19     $ 238.78     $ —    

Down 10%

  Up 10%     19.6059     $ 24.73     $ 24.70     $ 195.37     $ —    

Down 10%

  Unchanged     21.5665     $ 27.20     $ 27.17     $ 214.90     $ —    

Down 10%

  Down 10%     23.9627     $ 30.22     $ 30.19     $ 238.78     $ —    

Unchanged

  Up 10%     21.7843     $ 27.47     $ 27.45     $ 217.07     $ —    

Unchanged

  Down 10%     26.6253     $ 33.58     $ 33.55     $ 265.31     $ —    

Up 10%

  Up 10%     23.9627     $ 30.22     $ 30.19     $ 238.78     $ —    

Up 10%

  Unchanged     26.3590     $ 33.24     $ 33.21     $ 262.66     $ —    

Up 10%

  Down 10%     29.2878     $ 36.94     $ 36.90     $ 291.85     $ —    

Comparison of Market Prices

The following table sets forth the closing sale price per share of Ecolab common stock and Apergy common stock as reported on the NYSE as of December 18, 2019, the last trading day prior to the public announcement of the Transactions. Market price data for ChampionX common stock has not been presented because ChampionX is a wholly owned subsidiary of Ecolab, and shares of ChampionX common stock do not trade separately from shares of Ecolab common stock.

 

     Closing Sale Price
Per Share of
Ecolab
Common Stock
     Closing Sale Price
Per Share of
Apergy
Common Stock
 

December 18, 2019

   $ 185.69      $ 30.67  

 

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RISK FACTORS

You should carefully consider the following risk factors, together with the other information contained or incorporated by reference in this prospectus, including the factors discussed in Part I, Item 1A—Risk Factors, in Apergy’s Annual Report on Form 10-K for the year ended December 31, 2019. The risks described below are not the only risks relating to the Separation, the Distribution, the Merger and this Exchange Offer or that Apergy currently faces or the combined company will face after the consummation of the Transactions. Additional risks and uncertainties not currently known or that are currently expected to be immaterial may also materially and adversely affect Apergy’s or the combined company’s business, financial condition or results of operations or the price of Apergy common stock following the consummation of the Transactions.

If any of the following risks and uncertainties develops into actual events, these events could have a material adverse effect on Apergy’s or the combined company’s business, financial condition or results of operations after the Transactions. In addition, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

Risks Related to the Transactions

Apergy may not realize the anticipated cost synergies and growth opportunities from the Transactions.

Apergy expects that it will realize cost synergies, growth opportunities and other financial and operating benefits as a result of the Transactions. Apergy’s success in realizing these benefits, and the timing of their realization, depends on the successful integration of the business operations of the ChampionX Business with Apergy. Even if Apergy is able to integrate the ChampionX Business successfully, Apergy cannot predict with certainty if or when these cost synergies, growth opportunities and benefits will occur, or the extent to which they will actually be achieved. For example, the benefits from the Transactions may be offset by costs incurred in integrating the companies or in otherwise consummating the Transactions. Realization of any benefits and synergies could be affected by the factors described in other risk factors and a number of factors beyond Apergy’s control, including, without limitation, general economic conditions, further consolidation in the industry in which Apergy operates, increased operating costs and regulatory developments.

The integration of the ChampionX Business with Apergy following the Transactions may present significant challenges.

There is a significant degree of difficulty inherent in the process of integrating the ChampionX Business with Apergy. These difficulties include:

 

   

the integration of the ChampionX Business with Apergy’s current businesses while carrying on the ongoing operations of all businesses;

 

   

managing a significantly larger company than before the consummation of the Transactions;

 

   

coordinating geographically separate organizations;

 

   

integrating the business cultures of each of the ChampionX Business and Apergy, which may prove to be incompatible;

 

   

creating uniform standards, controls, procedures, policies and information systems and controlling the costs associated with such matters;

 

   

ability to ensure the effectiveness of internal control over financial reporting;

 

   

integrating certain information technology, purchasing, accounting, finance, sales, billing, human resources, payroll and regulatory compliance systems; and

 

   

the potential difficulty in retaining key officers and personnel of Apergy and ChampionX.

 

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The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of the ChampionX Business or Apergy’s business. Members of Apergy’s or the ChampionX Business’ senior management may be required to devote considerable amounts of time to this integration process, which will decrease the time they will have to manage Apergy or the ChampionX Business, serve the existing Apergy business or the ChampionX Business, or develop new products or strategies. If Apergy’s or the ChampionX Business’ senior management is not able to effectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, the business of Apergy or the ChampionX Business could suffer.

Apergy’s successful or cost-effective integration of the ChampionX Business cannot be assured. The failure to do so could have a material adverse effect on Apergy’s business, financial condition or results of operations after the Transactions.

Apergy and Ecolab may fail to obtain the required regulatory approvals in connection with the Merger in a timely fashion, if at all, or regulators may impose burdensome conditions.

Apergy and Ecolab are subject to certain antitrust and competition laws, and the proposed Merger is subject to review and approval by regulators under those laws. Although Apergy and Ecolab have agreed to use reasonable best efforts to obtain the requisite approvals, there can be no assurance that these regulatory approvals will be obtained. Failure to obtain these regulatory approvals could adversely affect Apergy’s ability to operate its business after the Transactions or jeopardize the consummation of the Transactions themselves.

For example, the requirement to receive certain regulatory approvals before the consummation of the Transactions could delay the completion of the Transactions if, for example, one or more government agencies request additional information from the parties in order to facilitate their review of the Transactions. Any delay in the completion of the Transactions could diminish the anticipated benefits of the Transactions or result in additional transaction costs, loss of revenue or other effects associated with uncertainty about the Transactions. In addition, these governmental entities may attempt to condition their approval of the Transactions on the imposition of conditions, terms, obligations or restrictions that could have a material adverse effect on the Transactions themselves or Apergy’s business after the Transactions, including, but not limited to, Apergy’s operating results or the value of its common stock. If Apergy agrees to any material conditions, terms, obligations or restrictions in order to obtain any approvals required to complete the Transactions, the business, financial condition or results of operations of the combined company may be adversely affected.

Failure to complete the Transactions could adversely impact the market price of Apergy common stock as well as its business and operating results.

The consummation of the Transactions is subject to numerous conditions, including without limitation: (i) the Distribution having taken place in accordance with the Separation Agreement; (ii) the effectiveness of Apergy’s registration statement registering Apergy common stock to be issued pursuant to the Merger Agreement, and any other registration statement required in connection with the Transactions; (iii) approval of the Share Issuance by the requisite vote of Apergy’s stockholders; (iv) obtaining antitrust or competition law regulatory approvals in certain jurisdictions; and (v) receipt by Ecolab of each of the Distribution Tax Opinion, the Merger Tax Opinion and the KPMG Tax Opinion with respect to certain aspects of the Transactions. See “The Transaction Agreements—The Merger Agreement—Conditions to the Merger.” There is no assurance that these conditions will be met and that the Transactions will be consummated.

If the Transactions are not completed for any reason, the price of Apergy common stock may decline to the extent that the market price of Apergy common stock reflects positive market assumptions that the Transactions will be completed and the related benefits will be realized. Apergy and Ecolab have expended and will continue to expend significant management time and resources and have incurred and will continue to incur significant expenses due to legal, advisory, printing and financial services fees related to the Transactions. These expenses

 

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must be paid regardless of whether the Transactions are consummated. Even if the Transactions are completed, any delay in the completion of the Transactions could diminish the anticipated benefits of the Transactions or result in additional transaction expenses, loss of revenue or other effects associated with uncertainty about the Transactions. If the Transactions are not consummated because the Merger Agreement is terminated, Apergy may be required under certain circumstances to pay Ecolab a termination fee of $89.8 million or may under other circumstances be required to reimburse Ecolab for expenses in connection with the Transactions in an amount equal to $25 million.

The pendency of the Merger could have an adverse effect on Apergy’s stock price, business, financial condition, results of operations or business prospects.

The announcement and pendency of the Merger could disrupt Apergy’s business in negative ways. For example, customers and other third-party business partners of Apergy or the ChampionX Business may seek to terminate and/or renegotiate their relationships with Apergy or ChampionX as a result of the Merger, whether pursuant to the terms of their existing agreements with Apergy and/or ChampionX or otherwise. In addition, current and prospective employees of Apergy and the ChampionX Business may experience uncertainty regarding their future roles with the combined company, which might adversely affect Apergy’s ability to retain, recruit and motivate key personnel. Should they occur, any of these events could adversely affect the stock price of, or harm the financial condition, results of operations or business prospects of, Apergy.

Apergy will incur significant costs related to the Transactions that could have a material adverse effect on its liquidity, cash flows and operating results.

Apergy expects to incur significant one-time costs in connection with the Transactions. These costs have been, and will continue to be, substantial and, in many cases, will be borne by Apergy whether or not the Merger is completed. A substantial majority of these one-time costs will be transaction-related fees and expenses and include, among others, fees paid to financial, legal, accounting and other professional fees and transition and pre-Merger integration planning-related expenses. While Apergy expects to be able to fund these one-time costs using cash from operations and borrowings under existing and anticipated credit sources, these costs will negatively impact Apergy’s liquidity, cash flows and results of operations in the periods in which they are incurred.

The Transactions may discourage other companies from trying to acquire Apergy before or for a period of time following completion of the Transactions.

Certain provisions in the Merger Agreement prohibit Apergy from soliciting any acquisition proposal during the pendency of the Merger. In addition, the Merger Agreement obligates Apergy to pay Ecolab a termination fee in certain circumstances. Apergy’s financial condition will be adversely affected as a result of the payment of the termination fee in certain circumstances involving alternative acquisition proposals, which might deter third parties from proposing alternative acquisition proposals, including acquisition proposals that might result in greater value to Apergy stockholders than the Transactions. In addition, certain provisions of the Tax Matters Agreement, which are intended to preserve the intended tax treatment of certain aspects of the Separation and the Distribution for U.S. federal income tax purposes, may discourage acquisition proposals for a period of time following the Transactions. Apergy currently expects to issue approximately 127.6 million shares of its common stock in connection with the Merger. See “The Transaction Agreements—The Merger Agreement—Merger Consideration.” Because Apergy will be a significantly larger company and have significantly more shares of common stock outstanding after the consummation of the Transactions, an acquisition of Apergy may become more expensive. As a result, some companies may not seek to acquire Apergy.

The Distribution could result in significant tax liability, and Apergy may be obligated to indemnify Ecolab for any such tax liability imposed on Ecolab.

The consummation of the Distribution is conditioned on Ecolab’s receipt of the Distribution Tax Opinion, which will provide that (among other things) the Contribution and Distribution, taken together, will qualify as a

 

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transaction described in Sections 355 and 368(a)(1)(D) of the Code, and an opinion from KPMG LLP, which we refer to as KPMG, that will address the tax treatment of certain aspects of the Transactions, which opinion we refer to as the KPMG Tax Opinion. If the Contribution and Distribution, taken together, so qualify, then (i) Ecolab stockholders will generally not recognize any gain or loss for U.S. federal income tax purposes as a result of the Distribution, and (ii) except for taxable income or gain possibly arising as a result of certain internal restructuring transactions undertaken in the Separation and with respect to any “intercompany transaction” required to be taken into account by Ecolab under the Treasury Regulations related to consolidated federal income tax returns, Ecolab will not recognize any gain or loss. None of Ecolab, ChampionX or Apergy intends to request any ruling from the Internal Revenue Service, which we refer to as the IRS, as to the U.S. federal income tax consequences of the Transactions. Neither the Distribution Tax Opinion nor the KPMG Tax Opinion will be binding on the IRS (or any applicable foreign taxing authorities) or the courts, and the IRS (or any applicable foreign taxing authorities) or the courts may not agree with the conclusions reached therein. There can be no assurance that the IRS (or any applicable foreign taxing authorities) will not successfully assert that the Distribution, or certain internal restructuring transactions undertaken in the Separation, are taxable transactions, and that a court will not sustain such assertion, which could result in tax being incurred by Ecolab stockholders and/or Ecolab.

If the Contribution and Distribution, taken together, were determined not to qualify as a transaction described in Sections 355 and 368(a)(1)(D) of the Code, for U.S. federal income tax purposes each Ecolab stockholder who receives ChampionX common stock in this Exchange Offer would generally be treated as recognizing taxable gain or loss equal to the difference between the fair market value of the ChampionX common stock received by the stockholder in this Exchange Offer and its tax basis in the shares of Ecolab common stock exchanged therefor, or, in certain circumstances, as receiving a taxable distribution equal to the fair market value of the ChampionX common stock received by the stockholder in this Exchange Offer. Further, if this Exchange Offer were not fully subscribed in such a situation and Ecolab undertook the clean-up spin-off, each Ecolab stockholder who receives ChampionX common stock in the clean-up spin-off would generally be treated as receiving a taxable distribution equal to the fair market value of the ChampionX common stock received by the stockholder in the clean-up spin-off.

In addition, if the Contribution and Distribution, taken together, were determined not to qualify as a transaction described in Sections 355 and 368(a)(1)(D) of the Code, for U.S. federal income tax purposes, Ecolab would generally recognize gain with respect to the transfer of ChampionX common stock in the Distribution if the value of ChampionX stock transferred exceeds Ecolab’s tax basis in such ChampionX stock.

Even if the Contribution and Distribution, taken together, otherwise qualify as a transaction described in Sections 355 and 368(a)(1)(D) of the Code, the Distribution will nonetheless be taxable to Ecolab (but not to Ecolab stockholders) pursuant to Section 355(e) of the Code if one or more persons acquire a 50% or greater interest (measured by vote or value) in the stock of Ecolab or ChampionX, directly or indirectly (including through acquisitions of the stock of Apergy after the Merger), as part of a plan or series of related transactions that includes the Distribution. For purposes of this test, the Merger will be treated as part of a plan that includes the Distribution, but it is expected that the Merger, standing alone, will not cause the Distribution to be taxable to Ecolab under Section 355(e) of the Code because holders of ChampionX common stock will own more than 50% of the common stock of Apergy following the Merger. However, if the IRS were to determine that other acquisitions of Ecolab stock, either before or after the Distribution, or Apergy stock after the Merger, are part of a plan or series of related transactions that includes the Distribution, such determination could result in the recognition of gain by Ecolab (but not by Ecolab stockholders) for U.S. federal income tax purposes, and the amount of taxes on such gain could be substantial. See “U.S. Federal Income Tax Consequences of the Distribution and the Merger.”

Under the Tax Matters Agreement, ChampionX and Apergy may be obligated, in certain cases, to indemnify Ecolab against taxes and certain tax-related losses of the Transactions that arise as a result of ChampionX’s or Apergy’s actions, or failure to act. See “U.S. Federal Income Tax Consequences of the Distribution and the

 

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Merger—Treatment of the Distribution” and “Additional Agreements Related to the Separation, the Distribution and the Merger—Tax Matters Agreement.” Any such indemnification obligation would likely be substantial and would likely have a material adverse effect on Apergy.

The Merger could result in significant tax liability to Dover, and Apergy may be obligated to indemnify Dover for any such tax liability imposed on Dover.

Under the tax matters agreement, dated May 9, 2018, which we refer to as the Dover Tax Matters Agreement, by and between Dover Corporation, which we refer to as Dover, and Apergy, Apergy would potentially be required to indemnify Dover against taxes incurred by Dover that arise as a result of Apergy taking or failing to take, as the case may be, certain actions that result in the distribution of Apergy by Dover, which we refer to as the Apergy Distribution, failing to meet the requirements of a tax-free distribution under Section 355 of the Code. The Dover Tax Matters Agreement required that, prior to entering into the Merger Agreement, Apergy obtain a tax opinion, acceptable to Dover, that the Merger would not cause the Apergy Distribution to fail to meet the requirements of a tax-free distribution under Section 355 of the Code and for Dover to consent to Apergy entering into and consummating the Merger. On December 18, 2019, Apergy obtained a tax opinion acceptable to Dover from Apergy’s tax counsel, Weil, Gotshal & Manges LLP, and Dover provided Apergy with Dover’s consent to entering into and consummating the Merger and all actions related thereto. Notwithstanding Apergy’s receipt of the tax opinion of Weil, Gotshal & Manges LLP, or Dover’s consent, Apergy must continue to indemnify Dover against certain tax-related losses under the Dover Tax Matters Agreement. The tax opinion of Weil, Gotshal & Manges LLP is not binding on the IRS or the courts, and the IRS or the courts may not agree with the conclusions reached therein. There can be no assurance that the IRS will not successfully assert that the Merger causes the Apergy Distribution to fail to meet requirements of a tax-free distribution under Section 355 of the Code and that a court will not sustain such assertion which could result in tax being incurred by Dover that must be indemnified by Apergy.

If the Merger is not treated as a reorganization within the meaning of Section 368(a) of the Code, the stockholders of ChampionX may have significant tax liability.

The consummation of the Merger is conditioned upon Ecolab’s receipt of the Merger Tax Opinion, which will provide that the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. If the Merger is so treated, then Ecolab stockholders that receive ChampionX common stock in the Distribution will generally not recognize any gain or loss for U.S. federal income tax purposes as a result of the Merger, except for any gain or loss attributable to the receipt of cash in lieu of fractional shares of Apergy common stock. The opinion will be based on the assumptions, representations or statements made by Ecolab, ChampionX and Apergy, and if such assumptions, representations or statements are, or become, inaccurate, incorrect or incomplete, or if Ecolab, ChampionX or Apergy breach any of their covenants, the opinion may be invalid and the conclusions reached therein could be jeopardized. None of Ecolab, ChampionX or Apergy intends to request any ruling from the IRS as to the U.S. federal income tax consequences of the Merger. Ecolab’s receipt of the Merger Tax Opinion will not preclude the IRS from asserting that the Merger is taxable. In such event, U.S. Holders (as defined below) of ChampionX stock could be subject to U.S. federal income tax liability. See “U.S. Federal Income Tax Consequences of the Distribution and the Merger—Treatment of the Merger.”

Under the Tax Matters Agreement, Apergy and ChampionX will be restricted from taking certain actions that could adversely affect the intended tax treatment of the Transactions, and such restrictions could significantly impair Apergy’s and ChampionX’s ability to implement strategic initiatives that otherwise would be beneficial.

The Tax Matters Agreement generally restricts Apergy and ChampionX from taking certain actions after the Distribution that could adversely affect the intended tax treatment of the Transactions. Failure to adhere to these restrictions, could result in tax being imposed on Ecolab for which Apergy and ChampionX could bear responsibility and for which Apergy and ChampionX could be obligated to indemnify Ecolab. Any such indemnification obligation would likely be substantial and would likely have a material adverse effect on

 

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Apergy. In addition, even if Apergy and ChampionX are not responsible for tax liabilities of Ecolab under the Tax Matters Agreement, ChampionX nonetheless could be liable under applicable tax law for such liabilities if Ecolab were to fail to pay such taxes. Because of these provisions in the Tax Matters Agreement, Apergy and ChampionX will be restricted from taking certain actions, particularly for the two (or, in certain cases three) years following the Merger, including (among other things) the ability to freely issue stock, to make acquisitions and to raise additional equity capital. These restrictions could have a material adverse effect on Apergy’s liquidity and financial condition, and otherwise could impair Apergy’s and ChampionX’s ability to implement strategic initiatives. Also, ChampionX’s and Apergy’s indemnity obligation to Ecolab might discourage, delay or prevent a change of control that stockholders of Apergy may consider favorable.

Current Apergy stockholders’ percentage ownership interest in Apergy will be substantially diluted in the Merger.

Immediately following the Merger, the pre-Merger Apergy equityholders will own, in the aggregate, approximately 38% of the issued and outstanding Apergy common stock on a fully diluted basis. See “The Transaction Agreements—the Merger Agreement—Merger Consideration.” Consequently, Apergy’s pre-Merger equityholders, as a group, will be substantially diluted in the Merger and have less ability to exercise influence over the management and policies of Apergy following the Merger than immediately prior to the Merger.

The calculation of the number of shares of Apergy common stock to be distributed in the Merger will not be adjusted if there is a change in the value of the ChampionX Business or Apergy before the Merger is completed.

The number of shares of Apergy common stock to be issued by Apergy in the Merger will not be adjusted if there is a change in the value of the ChampionX Business or its assets or the value of Apergy prior to the closing of the Transactions. ChampionX stockholders will receive a fixed number of shares of Apergy common stock pursuant to the Merger rather than a number of shares with a particular fixed market value. As a result, the actual value of the Apergy common stock to be received by ChampionX stockholders in the Merger will depend on the value of such shares at the time of closing of the Merger, and may be more or less than the current value of Apergy common stock.

The number of shares of ChampionX common stock available in this Exchange Offer, and the corresponding percentage of the combined company that will be owned, in the aggregate, by pre-Merger ChampionX stockholders is subject to variation depending upon the number of shares of Apergy common stock underlying Apergy Options, Apergy Restricted Stock Units and Apergy Adjusted Performance Based Restricted Stock Units to be granted by Apergy to ChampionX employees pursuant to the Employee Matters Agreement.

Following the Transactions, ChampionX equityholders will own, in the aggregate, approximately 62% of the issued and outstanding Apergy common stock on a fully diluted basis. The proportion of this 62% that will be attributable to the shares to be owned by ChampionX stockholders (i.e., shares that will be available and distributed in this Exchange Offer or if necessary the clean-up spin-off) to the amount that will be attributable to the Apergy equity awards that will be issued to ChampionX employees will be determined by formulas set forth in the Merger Agreement and Employee Matters Agreement. See “The Transactions—The Merger—Calculation of the Merger Consideration” for a more detailed description of how the Merger consideration is calculated. Of the 127.6 million shares of Apergy common stock currently expected to be issued to ChampionX equityholders in connection with the Merger, based on recent share prices of Ecolab and Apergy common stock and the ChampionX employees’ equity awards outstanding, ChampionX currently expects that approximately 122.0 million shares of ChampionX common stock would be available in this Exchange Offer, but factors largely outside of Ecolab’s control, such as changes in Ecolab’s and/or Apergy’s stock price, could cause both the number of shares available in this Exchange Offer and the proportion of the approximately 62% combined company ownership for ChampionX equityholders that is attributable to the equity awards for ChampionX employees, to continue to fluctuate.

 

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The ChampionX Business may be negatively impacted if Apergy is unable to provide benefits and services, or access to equivalent financial strength and resources, to the ChampionX Business that historically have been provided by Ecolab.

The ChampionX Business has historically received benefits and services from Ecolab and has benefited from Ecolab’s financial strength and extensive network of service offerings. After the Transactions, ChampionX will be a subsidiary of Apergy, and the ChampionX Business will no longer benefit from Ecolab’s services, financial strength or business relationships to the extent not otherwise addressed in the other transaction documents contemplated by the Separation Agreement, referred to as the Transaction Documents. While Ecolab has agreed to provide certain transition services to ChampionX for a period of time following the consummation of the Transactions, it cannot be assured that Apergy will be able to adequately replace or provide resources formerly provided by Ecolab, or replace them at the same or lower cost. If Apergy is not able to replace the resources provided by Ecolab or is unable to replace them without incurring significant additional costs or is delayed in replacing the resources provided by Ecolab, Apergy’s results of operations may be negatively impacted.

The historical financial information of ChampionX may not be representative of its results if it had been operated independently of Ecolab and as a result, may not be a reliable indicator of future results of ChampionX.

The ChampionX Business is currently operated through various subsidiaries of Ecolab. Consequently, the financial information of ChampionX included in this prospectus has been derived from the consolidated financial statements and accounting records of Ecolab and reflects assumptions and allocations made by Ecolab. The financial position, results of operations and cash flows of ChampionX presented may be different from those that would have resulted if ChampionX had been operated as a standalone company or by a company other than Ecolab. For example, in preparing the financial statements of ChampionX, Ecolab made an allocation of Ecolab costs and expenses that are attributable to ChampionX. However, these costs and expenses reflect the costs and expenses attributable to ChampionX as part of a larger organization and do not necessarily reflect costs and expenses that would be incurred by ChampionX had it been operated independently, and may not reflect costs and expenses that would have been incurred had ChampionX been operated as a part of Apergy. As a result, the historical financial information of ChampionX may not be a reliable indicator of ChampionX’s future results or the results that it will achieve as a part of Apergy.

The unaudited pro forma condensed combined financial statements of Apergy are based in part on certain assumptions regarding the Transactions and may not be indicative of Apergy’s future operating performance.

The historical financial statements included or incorporated by reference in this prospectus consist of the separate financial statements of ChampionX and Apergy, respectively. The unaudited pro forma condensed combined financial statements presented in this prospectus are not necessarily indicative of what the financial position or the results of operations of the combined company would have been had the Merger occurred as of the date or for the periods presented. The pro forma amounts also do not indicate what the financial position or results of operations of the combined company will be in the future.

Apergy will account for the Merger as an acquisition of ChampionX, with Apergy being the accounting acquirer. Following the effective date of the Merger, Apergy expects to complete the purchase price allocation for the acquisition of ChampionX after determining the fair value of ChampionX’s assets and liabilities. The final purchase price allocation may be different than the preliminary one reflected in the unaudited pro forma purchase price allocation presented in this prospectus, and this difference may be material.

The unaudited pro forma combined financial information does not reflect the costs of any integration activities or transaction-related costs or incremental capital expenditures that Apergy management believes are necessary to realize the anticipated synergies from the Transactions. Accordingly, the unaudited pro forma combined financial information included in this prospectus does not reflect what the combined company’s results of operations or operating condition would have been had Apergy and ChampionX been a consolidated entity during all periods presented, or what the combined company’s results of operations and financial condition will be in the future.

 

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Apergy and the ChampionX Business may have difficulty attracting, motivating and retaining executives and other employees in light of the Transactions.

Uncertainty about the effect of the Transactions on current Apergy employees and/or ChampionX Employees may have an adverse effect on Apergy and the ChampionX Business. This uncertainty may impair Apergy’s and the ChampionX Business’ ability to attract, retain and motivate personnel until the Transactions are completed. Employee retention may be particularly challenging during the pendency of the Transactions, as employees may feel uncertain about their future roles with Apergy or the ChampionX Business after their combination. If large numbers of employees, or a concentration of critical employees of Apergy or the ChampionX Business depart because of issues relating to the uncertainty or perceived difficulties of integration or a desire not to become employees of Apergy after the Transactions, Apergy’s ability to realize the anticipated benefits of the Transactions could be reduced.

The Separation Agreement limits the combined company’s ability to engage in certain activities competitive with Ecolab.

The Separation Agreement includes non-compete provisions pursuant to which Apergy generally agreed to not compete in the Water and Downstream Field businesses of Ecolab for five years following the Distribution subject to certain exceptions set forth in the Separation Agreement. See “The Transaction Agreements—The Separation Agreement—Covenant Not to Compete.” The foregoing restrictions may limit the combined company’s ability to engage in certain activities, may potentially lead to disputes and may materially and adversely affect the business, financial condition and results of operations of the combined company.

The trading prices of Apergy common stock may not be an appropriate proxy for the prices of ChampionX common stock.

The calculated per-share value for ChampionX common stock is based on the trading prices for Apergy common stock, which may not be an appropriate proxy for the prices of ChampionX common stock. There is currently no trading market for ChampionX common stock. Ecolab believes, however, that the trading prices for Apergy common stock are an appropriate proxy for the trading prices of ChampionX common stock because immediately following the consummation of this Exchange Offer, Merger Sub will be merged with and into ChampionX, whereby ChampionX will continue as the surviving corporation and a wholly owned subsidiary of Apergy. In the Merger, each outstanding share of ChampionX common stock will be cancelled and retired and will cease to exist and the holders of shares of ChampionX common stock (except for shares of ChampionX common stock held by ChampionX, which shares will be canceled and cease to exist, and no consideration will be delivered in exchange therefor) will receive the right to receive a number of duly authorized, validly issued, fully paid and nonassessable shares of Apergy common stock equal to the Merger Exchange Ratio. In addition, ChampionX will authorize the issuance of a number of shares of ChampionX common stock such that the total number of shares of ChampionX common stock outstanding immediately prior to the Distribution will be that number that results in the Merger Exchange Ratio equaling one. As a result, each share of ChampionX common stock (except for shares of ChampionX common stock held by ChampionX, which shares will be canceled and cease to exist, and no consideration will be delivered in exchange therefor) will be converted into one share of Apergy common stock in the Merger. There can be no assurance, however, that Apergy common stock after the issuance of shares of Champion common stock and the Merger will trade on the same basis as Apergy common stock trades prior to the Transactions. In addition, it is possible that the trading prices of Apergy common stock prior to consummation of the Merger will not fully reflect the anticipated value of Apergy common stock after the Merger. For example, trading prices of Apergy common stock on the Valuation Dates could reflect some uncertainty as to the timing or consummation of the Merger or could reflect trading activity by investors seeking to profit from market arbitrage.

 

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Risks Related to this Exchange Offer

Tendering Ecolab stockholders may receive a reduced premium or may not receive any premium in this Exchange Offer.

This Exchange Offer is designed to permit you to exchange your shares of Ecolab common stock for shares of ChampionX common stock at a 10% discount to the per-share value of ChampionX common stock, calculated as set forth in this prospectus. Stated another way, for each $100 of your Ecolab common stock accepted for exchange in this Exchange Offer, you will receive approximately $111.11 of ChampionX common stock (subject to the exception described below). The value of the Ecolab common stock will be based on the calculated per-share value of Ecolab common stock on the NYSE and the value of the shares of ChampionX common stock will be based on the calculated per-share value of Apergy common stock on the NYSE, in each case determined by reference to the simple arithmetic average of the daily VWAP on each of the Valuation Dates.

The number of shares you can receive is, however, subject to an upper limit of 24.6667 shares of ChampionX common stock for each share of Ecolab common stock accepted for exchange in this Exchange Offer. As a result, you may receive less than $111.11 of ChampionX common stock for each $100 of Ecolab common stock, depending on the calculated per-share value of Ecolab common stock and the calculated per-share value of ChampionX common stock at the expiration date. Because of the limit on the number of shares of ChampionX common stock you will receive in this Exchange Offer, if there is a drop of sufficient magnitude in the trading price of Apergy common stock relative to the trading price of Ecolab common stock, and/or if there is an increase of sufficient magnitude in the trading price of Ecolab common stock relative to the trading price of Apergy common stock, you may not receive $111.11 of ChampionX common stock for each $100 of Ecolab common stock, and could receive much less.

For example, if the calculated per-share value of Ecolab common stock was $210.31 (the highest closing price for Ecolab common stock on the NYSE during the three-month period ending on the second to last full trading day prior to commencement of this Exchange Offer) and the calculated per-share value of ChampionX common stock was $3.02 (the lowest closing price for Apergy common stock on the NYSE during that three-month period), the value of ChampionX common stock, based on the Apergy common stock price, received for shares of Ecolab common stock accepted for exchange would be approximately $35 for each $100 of Ecolab common stock accepted for exchange.

This Exchange Offer does not provide for a minimum exchange ratio. See “Exchange Offer—Terms of This Exchange Offer.” If the upper limit on the number of shares of ChampionX common stock that can be received for each share of Ecolab common stock tendered and accepted for exchange is in effect, then the exchange ratio will be fixed at the upper limit.

For example, if the trading price of Ecolab common stock were to increase during the last two full trading days of this Exchange Offer, the average Ecolab stock price used to calculate the exchange ratio would likely be lower than the closing price of shares of Ecolab common stock on the last full trading day prior to the expiration date of this Exchange Offer. As a result, you would receive fewer shares of ChampionX common stock, and therefore effectively fewer shares of Apergy common stock, for each $100 of shares of Ecolab common stock than you would have if the average Ecolab stock price were calculated on the basis of the closing price of shares of Ecolab common stock on the last full trading day prior to the expiration date of this Exchange Offer or on the basis of an averaging period that includes the last two full trading days prior to the expiration of this Exchange Offer. Similarly, if the trading price of Apergy common stock were to decrease during the last two full trading days prior to the expiration of this Exchange Offer, the average Apergy stock price used to calculate the exchange ratio would likely be higher than the closing price of Apergy common stock on the last full trading day prior to the expiration date. This could also result in your receiving fewer shares of ChampionX common stock, and therefore effectively fewer shares of Apergy common stock, for each $100 of Ecolab common stock than you would have received if the average Apergy common stock price were calculated on the basis of the closing price of Apergy common stock on the last full trading day prior to the expiration date or on the basis of an averaging period that included the last two full trading days prior to the expiration of this Exchange Offer.

 

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In addition, there is no assurance that holders of shares of Ecolab common stock that are exchanged for shares of ChampionX common stock in this Exchange Offer will be able to sell the shares of Apergy common stock after receipt in the Merger at prices comparable to the calculated per-share value of ChampionX common stock at the expiration date. For example, in the event that this Exchange Offer is not fully subscribed, Ecolab will distribute in the clean-up spin-off the remaining shares of ChampionX common stock that will convert into Apergy common stock in the Merger. Ecolab stockholders who receive Apergy common stock as a result of the clean-up spin-off (in the event this Exchange Offer is not fully subscribed) and the Merger may not want to be Apergy common stock holders and may sell those shares immediately in the public market. It is also possible that some Ecolab stockholders will sell the Apergy common stock they receive if, for reasons such as Apergy’s business profile or market capitalization, Apergy does not fit their investment objectives, or in the case of index funds, Apergy is not a participant in the index in which they are investing. The sales of significant amounts of Apergy common stock relating to the above events or the perception in the market that such sales will occur may decrease the market price of Apergy’s common stock.

Following the conversion of shares of ChampionX common stock into shares of Apergy common stock in the Merger, the former holders of shares of ChampionX common stock may experience a delay prior to receiving their shares of Apergy common stock or their cash in lieu of fractional shares, if any.

Following the conversion of shares of ChampionX common stock into shares of Apergy common stock, the former holders of shares of ChampionX common stock will receive their shares of Apergy common stock or cash in lieu of fractional shares, if any, only upon surrender of all necessary documents, duly executed, to the Exchange Offer agent. Until the distribution of the shares of Apergy common stock to the individual stockholder has been completed, the relevant holder of shares of Apergy common stock will not be able to sell its shares of Apergy common stock. Consequently, in case the market price for Apergy common stock should decrease during that period, the relevant stockholder would not be able to stop any losses by selling the shares of Apergy common stock. Similarly, the former holders of shares of ChampionX common stock who receive cash in lieu of fractional shares will not be able to invest the cash until the distribution to the relevant stockholder has been completed, and they will not receive interest payments for this time period.

Ecolab stockholders’ investment will be subject to different risks if this Exchange Offer is completed.

 

   

If an Ecolab stockholder validly tenders all of that stockholder’s shares of Ecolab common stock and this Exchange Offer is not oversubscribed, then, upon completion of this Exchange Offer and the Merger, that stockholder will no longer have an interest in Ecolab, but instead will directly own an interest in Apergy. As a result, that stockholder’s investment will be subject exclusively to risks associated with Apergy and not risks associated solely with Ecolab.

 

   

If an Ecolab stockholder validly tenders all of that stockholder’s shares of Ecolab common stock and this Exchange Offer is oversubscribed, then that stockholder’s tender of shares of Ecolab common stock will be subject to the proration procedures described in “Exchange Offer—Terms of This Exchange Offer—Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of Ecolab Common Stock.” As a result, unless that stockholder’s tendered shares constitutes an odd lot (i.e., fewer than 100 shares), upon completion of this Exchange Offer and the Merger, that stockholder will own an interest in both Ecolab and Apergy, and that stockholder’s investment will be subject to risks associated with both Ecolab and Apergy.

 

   

If an Ecolab stockholder validly tenders some, but not all, of that stockholder’s shares of Ecolab common stock, then, upon completion of this Exchange Offer, regardless of whether this Exchange Offer is fully subscribed, the number of shares of Ecolab common stock that stockholder owns will decrease (unless that stockholder otherwise acquires shares of Ecolab common stock), while the number of shares of ChampionX common stock, and therefore effectively shares of Apergy common stock, that stockholder owns will increase. As a result, that stockholder’s investment will be subject to risks associated with both Ecolab and Apergy.

 

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In addition to the consequences of this Exchange Offer described above, in the event that this Exchange Offer is not fully subscribed, Ecolab stockholders that remain stockholders of Ecolab following the completion of this Exchange Offer will receive shares of Apergy common stock (although they may instead receive only cash in lieu of a fractional share) when Ecolab completes the clean-up spin-off and ChampionX completes the Merger. As a result, their investment will be subject to risks associated with both Ecolab and Apergy.

Whether or not Ecolab stockholders tender their shares of Ecolab common stock, any Ecolab shares they hold after the completion of this Exchange Offer will reflect a different investment from the investment they previously held because Ecolab will no longer own the ChampionX Business.

Risks Related to the Combined Company’s Business Following the Transactions

Sales of Apergy common stock after the Transactions may negatively affect the market price of Apergy common stock.

The shares of Apergy common stock to be issued in the Transactions to holders of shares of ChampionX common stock will generally be eligible for immediate resale. The market price of Apergy common stock could decline as a result of sales of a large number of shares of Apergy common stock in the market after the consummation of the Transactions or even the perception that these sales could occur.

It is expected that upon completion of the Transactions, ChampionX equityholders will hold approximately 62% of Apergy’s common stock on a fully-diluted basis and Apergy equityholders will hold approximately 38% of Apergy’s common stock on a fully-diluted basis. Currently, Ecolab stockholders may include index funds that have performance tied to certain stock indices and institutional investors subject to various investing guidelines.

Because Apergy may not be eligible to be included in these indices following the consummation of the Transactions or may not meet the investing guidelines of some of these institutional investors and index funds, such investors and index funds may decide to or may be required to sell the shares of Apergy common stock that they receive in the Transactions. In addition, the investment fiduciaries of Ecolab’s defined contribution plans may decide to sell any shares of Apergy common stock that the trusts for these plans receive in the Transactions, or may decide not to participate in this Exchange Offer, in response to their fiduciary obligations under applicable law. These sales, or the possibility that these sales may occur, may also make it more difficult for Apergy to obtain additional capital by selling equity securities in the future at a time and at a price that it deems appropriate.

Trends in crude oil and natural gas prices may affect the drilling and production activity, profitability and financial stability of the combined company’s customers and therefore the demand for, and profitability of the combined company’s products and services, which could have a material adverse effect on the combined company’s business, results of operations and financial condition.

The oil and gas industry is cyclical in nature and experiences periodic downturns of varying length and severity. The oil and gas industry experienced a significant downturn in 2015 and 2016 as a result of a sharp decline in crude oil prices. Crude oil prices slightly recovered in late 2016 and into 2017, but experienced a volatile decline again during late 2018. Price volatility continued throughout 2019 and, partially due to the emergence of the COVID-19 pandemic and failure of the Organization of the Petroleum Exporting Countries (“OPEC”) and other major producers to agree on production cuts, has become more extreme in 2020. Demand for the combined company’s products and services is sensitive to the level of capital spending by oil and natural gas companies and the corresponding drilling and production activity. The level of drilling and production activity is directly affected by trends in crude oil and natural gas prices, which are influenced by numerous factors affecting the supply and demand for oil and gas, including:

 

   

worldwide economic activity including disruption to global trade;

 

   

the level of exploration and production activity;

 

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interest rates and the cost of capital;

 

   

environmental regulation;

 

   

federal, state and foreign policies and regulations regarding current and future exploration and development of oil and gas;

 

   

the ability and/or desire of OPEC and other major producers to set and maintain production levels and influence pricing;

 

   

the cost of exploring and producing oil and gas;

 

   

the pace of adoption and cost of developing alternative energy sources;

 

   

the availability, expiration date and price of onshore and offshore leases;

 

   

the discovery rate of new oil and gas reserves in onshore and offshore areas;

 

   

the success of drilling for oil and gas in unconventional resource plays such as shale formations;

 

   

the depletion rate of existing wells in productions;

 

   

takeaway capacity within producing basins;

 

   

alternative opportunities to invest in onshore exploration and production opportunities;

 

   

domestic and global political and economic uncertainty, socio-political unrest and instability, terrorism or hostilities;

 

   

the recent COVID-19 pandemic or other health pandemics and epidemics;

 

   

technological advances; and

 

   

weather conditions.

Many of these factors are beyond the combined company’s control. For example, in March 2020, members of OPEC and Russia considered extending their previously agreed oil production cuts and potentially making additional oil production cuts. However, these negotiations were unsuccessful. As a result, Saudi Arabia announced a significant reduction in its export prices and Russia announced the expiration of all agreed oil production cuts between members of OPEC and Russia. Following these announcements, and also as a result of the increased global scale and severity of the COVID-19 outbreak during this period, global oil and natural gas prices declined sharply. While a deal to cut production has since been announced by OPEC and its allies, the situation has resulted in a significant downturn in the industry and continued volatility in oil prices, even resulting in a negative oil futures price on one recent day. To the extent that the outbreak of COVID-19 continues to negatively impact demand and OPEC members and other oil exporting nations fail to implement production cuts or other actions that are sufficient to support and stabilize commodity prices, ChampionX and Apergy expect there to be an excess supply of oil and natural gas for a sustained period.

Apergy expects continued volatility in both crude oil and natural gas prices (including that such prices could remain at current levels or decline further for an extended period of time), as well as in the level of drilling and production related activities. The combined company’s ability to regulate its operating activities in response to lower oilfield service activity levels during periodic industry downturns will be important to its business, results of operations and prospects. However, a significant and/or extended continuation of the recent downturn in the industry could result in the reduction in demand for the combined company’s products and services and could have a material adverse effect on its business, results of operations, financial condition and cash flows.

The combined company might be unable to successfully compete with other companies in its industry.

The markets in which Apergy and the ChampionX Business operate, and the combined company will operate, are highly competitive. The principal competitive factors in Apergy’s and the ChampionX Business’s markets are, and the combined company’s markets will be, customer service, product quality and performance, price, breadth of product offering, market expertise and innovation. In some of Apergy’s and the ChampionX Business’s product and service offerings, Apergy and ChampionX compete with the oil and gas industry’s largest oilfield service providers. These large national and multi-national companies may have longer operating histories, greater brand recognition, and a stronger presence in geographic markets than us. They may also have more robust financial and technical capabilities. In addition, Apergy and the ChampionX Business compete, and the

 

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combined company will compete, with many smaller companies capable of effectively competing on a regional or local basis. The combined company’s competitors may be able to respond more quickly to new or emerging technologies and services and changes in customer requirements. Many contracts are awarded on a bid basis, which further increases competition based on price. As a result of the competitive environment in which it operates, the combined company may lose market share, be unable to maintain or increase prices for its products and services, or be unable to acquire additional business opportunities, which could have a material adverse effect on its business, results of operations, financial condition and cash flows.

If the combined company is unable to develop new products and technologies, its competitive position may be impaired, which could materially and adversely affect its sales and market share.

The markets in which Apergy and the ChampionX Business operate, and the combined company will operate, are characterized by changing technologies and the introduction of new products and services. As a result, the combined company’s success is dependent upon its ability to develop or acquire new products and services on a cost-effective basis, to introduce them into the marketplace in a timely manner, and to protect and maintain critical intellectual property assets related to these developments. Difficulties or delays in research, development or production of new products and technologies, or failure to gain market acceptance of new products and technologies, may significantly reduce future revenue and materially and adversely affect the combined company’s competitive position. While the combined company intends to continue to commit financial resources and effort to the development of new products and services, it may not be able to successfully differentiate its products and services from those of its competitors. The combined company’s customers may not consider its proposed products and services to be of value to them or may not view them as superior to its competitors’ products and services. In addition, the combined company’s competitors or customers may develop new technologies which address similar or improved solutions to the combined company’s existing technologies. Further, the combined company may not be able to adapt to evolving markets and technologies, develop new products, achieve and maintain technological advantages or protect technological advantages through intellectual property rights. If the combined company does not successfully compete through the development and introduction of new products and technologies, its business, results of operations, financial condition and cash flows could be materially adversely affected.

The combined company could lose customers or generate lower revenue, operating profits and cash flows if there are significant increases in the cost of raw materials or if it is unable to obtain raw materials.

Apergy purchases, and the combined company will purchase, raw materials, sub-assemblies and components for use in manufacturing operations, which exposes it to volatility in prices for certain commodities. Significant price increases for these commodities could adversely affect the combined company’s operating profits. While the combined company will generally attempt to mitigate the impact of increased raw material prices by endeavoring to make strategic purchasing decisions, broadening its supplier base and passing along increased costs to customers, there may be a time delay between the increased raw material prices and the ability to increase the prices of products. Additionally, the combined company may be unable to increase the prices of products due to a competitor’s pricing pressure or other factors. While raw materials are generally available now, the inability to obtain necessary raw materials could affect the combined company’s ability to meet customer commitments and satisfy market demand for certain products. Certain of Apergy’s and the ChampionX Business’s product lines depend on a limited number of third-party suppliers and vendors. The ability of these third parties to deliver raw materials may be affected by events beyond Apergy’s and the ChampionX Business’s control. In addition, public health threats, such as the coronavirus, severe influenza and other highly communicable viruses or diseases could limit access to vendors and their facilities, or the ability to transport raw materials from the combined company’s vendors, which would adversely affect the combined company’s ability to obtain necessary raw materials for certain of its products. Consequently, a significant price increase in raw materials, or their unavailability, may result in a loss of customers and adversely impact the combined company’s business, results of operations, financial condition and cash flows.

 

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Federal, state and local legislative and regulatory initiatives relating to oil and gas development and the potential for related litigation could result in increased costs and additional operating restrictions or delays for the combined company’s customers, which could reduce demand for the combined company’s products and negatively impact the combined company’s business, financial condition and results of operations.

Environmental laws and regulations could limit the combined company’s customers’ exploration and production activities. Although Apergy and the ChampionX Business do not directly engage in drilling or hydraulic fracturing activities, Apergy and the ChampionX Business provide products and services to operators in the oil and gas industry. There has been significant growth in opposition to oil and gas development both in the United States and globally. This opposition is focused on attempting to limit or stop hydrocarbon development in certain areas. Examples of such opposition include: (i) efforts to reduce access to public and private lands, (ii) delaying or canceling permits for drilling or pipeline construction, (iii) limiting or banning industry techniques such as hydraulic fracturing, and/or adding restrictions on the use of water and associated disposal, (iv) delaying or denying air-quality permits, and (v) advocating for increased regulations, punitive taxation, or citizen ballot initiatives or moratoriums on industry activity.

In addition, various state and local governments have implemented, or are considering, increased regulatory oversight of oil and gas development through additional permitting requirements, operational restrictions, including on the time, place and manner of drilling activities, disclosure requirements and temporary or permanent bans on hydraulic fracturing or other facets of crude oil and natural gas exploration and development in certain areas such as environmentally sensitive watersheds. Increased regulation and opposition to oil and gas activities could increase the potential for litigation concerning these activities, and could include companies who provide products and services used in hydrocarbon development, such as Apergy’s.

The adoption of new laws or regulations at the federal, state, or local levels imposing reporting obligations, or otherwise limiting or delaying hydrocarbon development, could make it more difficult to complete oil and gas wells, increase the combined company’s customers’ costs of compliance and doing business, and otherwise adversely affect the oil and gas activities they pursue. Such developments could negatively impact demand for the combined company’s products and services. In addition, heightened political, regulatory and public scrutiny, including lawsuits, could expose the combined company or the combined company’s customers to increased legal and regulatory proceedings, which could be time-consuming, costly, or result in substantial legal liability or significant reputational harm. The combined company could be directly affected by adverse litigation or indirectly affected if the cost of compliance or the risks of liability limit the ability or willingness of the combined company’s customers to operate. Such costs and scrutiny could directly or indirectly, through reduced demand for the combined company’s products and services, have a material adverse effect on the combined company’s business, results of operations, financial condition and cash flows.

The combined company and its customers will be subject to extensive environmental and health and safety laws and regulations that may increase the combined company’s costs, limit the demand for its products and services or restrict its operations.

The combined company’s operations and the operations of the combined company’s customers will be subject to numerous and complex federal, state, local and foreign laws and regulations relating to the protection of human health, safety and the environment. These laws and regulations may adversely affect the combined company’s customers by limiting or curtailing their exploration, drilling and production activities, the products and services it designs, markets and sells and the facilities where it manufactures its products. For example, the combined company’s operations and the operations of the combined company’s customers will be subject to numerous and complex laws and regulations that, among other things: may regulate the management and disposal of hazardous and non-hazardous wastes; may require acquisition of environmental permits related to its operations; may restrict the types, quantities and concentrations of various materials that can be released into the environment; may limit or prohibit operational activities in certain ecologically sensitive and other protected areas; may regulate specific health and safety criteria addressing worker protection; may require compliance with

 

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operational and equipment standards; may impose testing, reporting and record-keeping requirements; and may require remedial measures to mitigate pollution from former and ongoing operations. Sanctions for noncompliance with such laws and regulations may include revocation of permits, corrective action orders, administrative or civil penalties, criminal prosecution and the imposition of injunctions to prohibit certain activities or force future compliance.

Some environmental laws and regulations provide for joint and several strict liability for remediation of spills and releases of hazardous substances. In addition, the combined company or its customers may be subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances, as well as damage to natural resources. These laws and regulations may expose the combined company or its customers to liability for the conduct of or conditions caused by others, or for the combined company’s acts or for the acts of the combined company’s customers that were in compliance with all applicable laws and regulations at the time such acts were performed. Any of these laws and regulations could result in claims, fines or expenditures that could be material to the combined company’s business, results of operations, financial condition and cash flows.

Environmental laws and regulations, and the interpretation and enforcement thereof, frequently change, and have tended to become more stringent over time. New laws and regulations may have a material adverse effect on the combined company’s customers by limiting or curtailing their exploration, drilling and production activities, which may adversely affect the combined company’s operations by limiting demand for the combined company’s products and services. Additionally, the implementation of new laws and regulations may have a material adverse effect on the combined company’s operating results by requiring the combined company to its operations or products or shut down some or all of its facilities.

Numerous proposals have been made, and are likely to continue to be made, at various levels of government to monitor and limit emissions of greenhouse gases (“GHG”). Past sessions of the U.S. Congress considered, but did not enact, legislation to address climate change. The EPA and other federal agencies previously issued regulations that aim to reduce GHG emissions; however, the current administration has generally indicated an interest in scaling back or rescinding regulations addressing GHG emissions, including those affecting the U.S. oil and gas industry. It is difficult to predict the extent to which such policies will be implemented or the outcome of any related litigation. Any regulation of GHG emissions could result in increased compliance costs or additional operating restrictions for the combined company and/or its customers and limit or curtail exploration, drilling and production activities of the combined company’s customers, which could directly or indirectly, through reduced demand for the combined company’s products and services, adversely affect the combined company’s business, results of operations, financial condition and cash flows.

The combined company’s growth and results of operations may be adversely affected if it is unable to complete third party acquisitions on acceptable terms.

Over time, it is expected that the combined company will acquire value creating, add-on capabilities that broaden its existing technological, geographic and cost position, thereby complementing the combine company’s businesses. However, there can be no assurance that the combined company will be able to find suitable opportunities to purchase or to acquire such capabilities on acceptable terms. If the combined company is unsuccessful in its acquisition efforts, its revenue growth could be adversely affected. In addition, the combined company will face the risk that a completed acquisition may underperform relative to expectations. The combined company may not achieve the synergies originally anticipated, may become exposed to unexpected liabilities, or may not be able to sufficiently integrate completed acquisitions into its then current business and growth model. These factors could potentially have an adverse impact on the combined company’s business, results of operations, financial condition and cash flows.

 

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The combined company’s products will be used in operations that are subject to potential hazards inherent in the oil and gas industry and, as a result, it is exposed to potential liabilities that may affect its financial condition and reputation.

Apergy’s products are, and the combined company’s products will be, used in potentially hazardous drilling, completion and production applications in the oil and gas industry where an accident or a failure of a product can potentially have catastrophic consequences. Risks inherent in these applications, such as equipment malfunctions and failures, equipment misuse and defects, explosions, blowouts and uncontrollable flows of oil, natural gas or well fluids can cause personal injury, loss of life, suspension of operations, damage to formations, damage to facilities, business interruption and damage to or destruction of property, surface and drinking water resources, equipment and the environment. While Apergy currently maintains insurance protection against some of these risks and seek to obtain indemnity agreements from its customers requiring them to hold it harmless from some of these risks, Apergy’s current insurance and contractual indemnity protection may not be sufficient or effective enough to protect it under all circumstances or against all risks. The occurrence of a significant event not fully insured or indemnified against, or the failure of a customer to meet its indemnification obligations to Apergy could adversely affect Apergy’s business, results of operations, financial condition and cash flows.

The combined company’s industry is undergoing continuing consolidation that may impact its results of operations.

The oil and gas industry continues to experience consolidation and as a result, some of Apergy’s largest customers have consolidated and are using their size and purchasing power to seek economies of scale and pricing concessions. This consolidation may result in reduced capital spending by some of the combined company’s customers or the acquisition of one or more of the combined company’s primary customers, which may lead to decreased demand for the combined company’s products and services. There is no assurance that the combined company will be able to maintain its level of sales to a customer that has consolidated, or replace that revenue with increased business activity with other customers. As a result, the acquisition of one or more of the combined company’s primary customers may have a significant adverse impact on the combined company’s business, results of operations, financial condition and cash flows. Apergy is unable to predict what effect consolidations in the industry may have on prices, capital spending by the combined company’s customers, the combined company’s selling strategies, the combined company’s competitive position, the combined company’s ability to retain customers or the combined company’s ability to negotiate favorable agreements with its customers.

Apergy and the ChampionX Business are subject to information technology, cybersecurity and privacy risks.

Apergy depends on, and the combined company will depend on, various information technologies and other products and services to store and process information and otherwise support its business activities. Apergy also manufactures and sells hardware and software to provide monitoring, controls and optimization of customer critical assets in oil and gas production and distribution. In addition, certain of ChampionX’s customer offerings include digital components, such as remote monitoring of certain customer operations. Apergy also provides services to maintain these systems. Additionally, Apergy’s operations rely, and the combined company’s operations will rely, upon partners, vendors and other third-party providers of information technology and other products and services. If any of these information technologies, products or services are damaged, cease to properly function, are breached due to employee error, malfeasance, system errors, or other vulnerabilities, or are subject to cybersecurity attacks, such as those involving unauthorized access, malicious software and/or other intrusions, Apergy and the combined company or their respective partners, vendors or other third parties could experience: (i) production downtimes, (ii) operational delays, (iii) the compromising of confidential, proprietary or otherwise protected information, including personal and customer data, (iv) destruction, corruption, or theft of data, (v) security breaches, (vi) other manipulation, disruption, misappropriation or improper use of its systems or networks, (vii) financial losses from remedial actions, (viii) loss of business or potential liability, (ix) adverse media coverage, and (x) legal claims or legal proceedings, including regulatory investigations and actions, and/or damage to its reputation. While Apergy and ChampionX attempt to mitigate these risks by employing a number

 

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of measures, including employee training, technical security controls and maintenance of backup and protective systems, Apergy’s, the combined company’s and each of their respective partners’, vendors’ and other third-parties’ systems, networks, products and services remain potentially vulnerable to known or unknown cybersecurity attacks and other threats, any of which could have a material adverse effect on Apergy’s or the combined company’s business, results of operations, financial condition and cash flows.

The combined company will be subject to risks relating to existing international operations and expansion into new geographical markets.

The combined company will focus on expanding sales globally as part of its overall growth strategy and expect sales from outside the United States to continue to represent a significant portion of its revenue. Apergy’s and the combined company’s international operations and Apergy’s global expansion strategy are subject to general risks related to such operations, including:

 

   

political, social and economic instability and disruptions;

 

   

government export controls, economic sanctions, embargoes or trade restrictions;

 

   

the imposition of duties and tariffs and other trade barriers;

 

   

limitations on ownership and on repatriation or dividend of earnings;

 

   

transportation delays and interruptions;

 

   

labor unrest and current and changing regulatory environments;

 

   

increased compliance costs, including costs associated with disclosure requirements and related due diligence;

 

   

difficulties in staffing and managing multi-national operations;

 

   

limitations on Apergy’s and the combined company’s ability to enforce legal rights and remedies;

 

   

access to or control of networks and confidential information due to local government controls and vulnerability of local networks to cyber risks; and

 

   

fluctuations in foreign currency exchange rates.

If the combined company is unable to successfully manage the risks associated with expanding its global business or adequately manage operational risks of its existing international operations, these risks could have a material adverse effect on the combined company’s growth strategy into new geographical markets, the combined company’s reputation, the combined company’s business, results of operations, financial condition and cash flows.

The combined company’s reputation, ability to do business and results of operations may be impaired by improper conduct by or disputes with any of its employees, agents or business partners and it will have an increased compliance burden with respect to, and risk of violations of, anti-bribery, trade control, trade sanctions, anti-corruption and similar laws.

Apergy’s operations require, and the combined company’s operations will require, it to comply with a number of U.S. and international laws and regulations, including those governing payments to government officials, bribery, fraud, anti-kickback and false claims, competition, export and import compliance, money laundering and data privacy, as well as the improper use of proprietary information or social media. In particular, Apergy’s international operations are, and the combined company’s international operations will be, subject to the regulations imposed by the Foreign Corrupt Practices Act and the United Kingdom Bribery Act 2010 as well as anti-bribery and anti-corruption laws of various jurisdictions in which Apergy operates. While Apergy strives to maintain high standards, it cannot provide assurance that its internal controls and compliance systems will always

 

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protect it from acts committed by Apergy’s or the combined company’s employees, agents or business partners that would violate such U.S. or international laws or regulations or fail to protect Apergy’s and the combined company’s confidential information. Any such violations of law or improper actions could subject the combined company to civil or criminal investigations in the United States or other jurisdictions, could lead to substantial civil or criminal, monetary and non-monetary penalties and related stockholder lawsuits, could lead to increased costs of compliance and could damage the combined company’s reputation, business, results of operations, financial condition and cash flows. ChampionX’s significant international business will increase corruption risks for the combined company, relative to Apergy as a standalone company.

Additionally, Apergy conducts, and the combined company will conduct, some operations through joint ventures in which unaffiliated third parties may control or have significant influence on the operations of the joint venture. As with any joint venture arrangement, differences in views among the joint venture participants may result in delayed decisions, the joint venture operating in a manner that is contrary to Apergy’s preference or in failures to agree on major issues. These factors could have a material adverse effect on the business and results of operations of Apergy’s joint ventures and, in turn, Apergy’s or the combined company’s business and consolidated results of operations.

Tariffs and other trade measures could adversely affect the combined company’s results of operations, financial position and cash flows.

In 2019, the U.S. government continued to impose tariffs on steel and aluminum and a broad range of other products imported into the United States. In response to the tariffs imposed by the U.S. government, the European Union, Canada, Mexico, India and China have announced tariffs on U.S. goods and services. The new tariffs have increased Apergy’s material input costs, and any further trade restrictions, retaliatory trade measures and additional tariffs could result in higher input costs to the combined company’s products. The combined company may not be able to fully mitigate the impact of these increased costs or pass price increases on to its customers. While tariffs and other retaliatory trade measures imposed by other countries on U.S. goods have not yet had a significant impact on Apergy’s business or results of operations, it cannot predict further developments, and such existing or future tariffs could have a material adverse effect on the combined company’s results of operations, financial position and cash flows.

Changes in domestic and foreign governmental laws, regulations and policies, risks associated with emerging markets, changes in statutory tax rates and laws, and unanticipated outcomes with respect to tax audits could adversely affect the combined company’s business, profitability and reputation.

Apergy’s and the combined company’s domestic and international sales and operations are subject to risks associated with changes in laws, regulations and policies (including environmental and employment regulations, export/import laws, tax policies such as export subsidy programs and research and experimentation credits, carbon emission regulations and other similar programs). Failure to comply with any of the foregoing laws, regulations and policies could result in civil and criminal, monetary and non-monetary penalties, as well as damage to Apergy’s reputation. In addition, Apergy cannot provide assurance that its costs of complying with new and evolving regulatory reporting requirements and current or future laws, including environmental protection, employment, data security, data privacy and health and safety laws, will not exceed Apergy’s estimates. In addition, Apergy has made investments in certain countries, including Argentina, Australia, Bahrain, Colombia and Oman, and ChampionX has made investments in certain countries, including Angola, Azerbaijan, Equatorial Guinea, Ghana, India, Kazakhstan, Malaysia, Nigeria, Russia, Saudi Arabia and the United Arab Emirates, and the combined company may in the future invest in other countries, any of which may carry high levels of currency, political, compliance, or economic risk. While these risks or the impact of these risks are difficult to predict, any one or more of them could adversely affect the combined company’s business, results of operations and reputation.

Apergy is, and the combined company will be, subject to taxation in a number of jurisdictions. Accordingly, its effective tax rate is impacted by changes in the mix among earnings in countries with differing statutory tax

 

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rates. A material change in the statutory tax rate or interpretation of local law in a jurisdiction in which the combined company will have significant operations could adversely impact its effective tax rate and impact its financial results. For example, the U.S. bill commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”), which was enacted on December 22, 2017, significantly changed U.S. tax law by, among other things, imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries and imposing limitations on the ability to deduct interest expense.

The combined company’s tax returns will be subject to audit and taxing authorities could challenge the combined company’s operating structure, taxable presence, application of treaty benefits or transfer pricing policies. If changes in statutory tax rates or laws or audits result in assessments different from amounts estimated, then Apergy’s business, results of operations, financial condition and cash flows may be adversely affected. In addition, changes in tax laws could have an adverse effect on Apergy’s customers, resulting in lower demand for Apergy’s products and services.

Failure to attract, retain and develop personnel for key management could have an adverse effect on the combined company’s results of operations, financial condition and cash flows.

The combined company’s growth, profitability and effectiveness in conducting its operations and executing its strategic plans depend in part on its ability to attract, retain and develop qualified personnel, align them with appropriate opportunities for key management positions and support for strategic initiatives. Additionally, during periods of increased investment in the oil and gas industry, competition to hire may increase and the availability of qualified personnel may be reduced. If the combined company is unsuccessful in its efforts to attract and retain qualified personnel, the combined company’s business, results of operations, financial condition, cash flows, market share and competitive position could be adversely affected. Additionally, the combined company could miss opportunities for growth and efficiencies.

The credit risks of the combined company’s customer base could result in losses.

Many of the combined company’s customers will be oil and gas companies that have faced or may in the future face liquidity constraints during adverse commodity price environments. These customers impact the combined company’s overall exposure to credit risk as they are also affected by prolonged changes in economic and industry conditions such as the current downturn in the oil and gas industry as a result of the lower crude oil and nature gas price environment. If a significant number of the combined company’s customers experience a prolonged business decline or disruptions, the combined company may incur increased exposure to credit risk and bad debts.

The loss of one or more significant customers could have an adverse impact on the combined company’s financial results.

The combined company’s customers will represent a combination of some of the largest operators in the oil and gas drilling and production markets, including major integrated, large, medium and small independents, and foreign national oil and gas companies, as well as oilfield equipment and service providers. In 2019, Apergy’s top 10 customers represented approximately 41% of total revenue. No customer accounted for net sales equal to 10 percent or more of Apergy’s total revenues for the years ended December 31, 2019, 2018 and 2017. In 2019, ChampionX’s top 10 customers represented approximately 43% of ChampionX combined net sales. No customer accounted for net sales equal to 10 percent or more of ChampionX’s total revenues for the years ended December 31, 2019, 2018 and 2017. While Apergy and ChampionX are not dependent on any one customer or group of customers, the loss of one or more of its significant customers could have an adverse effect on the combined company’s business, results of operations, financial condition and cash flows.

The inability to protect or obtain patent and other intellectual property rights could adversely affect the combined company’s revenue, operating profits and cash flows.

Apergy owns, and the combined company will own, patents, trademarks, licenses and other intellectual property related to its products and services, and Apergy continuously invests, and the combined company will continuously

 

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invest, in research and development that may result in innovations and intellectual property rights. Apergy employs, and the combined company will employ, various measures to develop, maintain and protect its innovations and intellectual property rights. These measures may not be effective in capturing intellectual property rights, and they may not prevent Apergy’s or the combined company’s intellectual property from being challenged, invalidated, circumvented, infringed, misappropriated or otherwise violated, particularly in countries where intellectual property rights are not highly developed or protected. Unauthorized use of Apergy’s or the combined company’s intellectual property rights and any potential litigation Apergy or the combined company may initiate or have initiated against it in respect of its respective intellectual property rights could adversely impact Apergy’s or the combined company’s competitive position and have a negative impact on Apergy’s or the combined company’s business, results of operations, financial condition and cash flows.

A deterioration in the combined company’s future expected profitability or cash flows could result in an impairment of its recorded goodwill and intangible assets.

Apergy has significant goodwill and intangible assets recorded on its consolidated balance sheet. The valuation and classification of these assets and the assignment of useful lives to intangible assets involve significant judgments and the use of estimates. Impairment testing of goodwill and intangible assets requires significant use of judgment and assumptions, particularly as it relates to the determination of fair market value. A decrease in the long-term economic outlook and future cash flows of the combined company’s business could significantly impact asset values and potentially result in the impairment of intangible assets, including goodwill. In the first quarter ended March 31, 2020, Apergy and ChampionX (with Ecolab), performed an impairment assessment triggered by the substantial decline in oil prices and COVID-19 pandemic. Based on the preliminary analysis, Apergy recorded an impairment of goodwill and long-lived assets in its Production & Automation Technologies segment in the first quarter of 2020. The final computation of the loss resulting from the impairment calculation is expected to be in a range of $650 million to $750 million. Based on the preliminary analysis, ChampionX estimated goodwill impairment in its Specialty Performance reporting unit would be in a range of $125 million to $175 million, though ChampionX is in the process of finalizing the impairment analysis. The value of the combined company’s business could continue to be unfavorably impacted by steep declines in revenue and order rates to the extent as drilling and production activities would be reduced due to, but not necessarily limited to, sustained unfavorable crude oil prices and lower U.S. rig counts. Accordingly, sustained future economic declines could result in additional impairment charges that could have a material adverse effect on the combined company’s results of operations.

The combined company’s exposure to exchange rate fluctuations on cross-border transactions and the translation of local currency results into U.S. dollars could negatively impact its results of operations.

A portion of Apergy’s business is, and a portion of the combined company’s business will be, transacted and/or denominated in foreign currencies, and fluctuations in currency exchange rates could have a significant impact on Apergy’s results of operations, financial condition and cash flows, which are presented in U.S. dollars. Cross-border

 

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transactions, both with external parties and intercompany relationships, result in increased exposure to foreign exchange effects. Although the impact of foreign currency fluctuations on Apergy’s results of operations has historically not been material, significant changes in currency exchange rates, principally the Canadian Dollar, Australian Dollar, Argentinian Peso, Omani Rial, Colombian Peso, Euro, British Pound Sterling, Russian Ruble and Brazilian Real could negatively affect Apergy’s results of operations. Additionally, the strengthening of the U.S. dollar potentially exposes Apergy and the combined company to competitive threats from lower cost producers in other countries and could result in unfavorable translation effects as the results of foreign locations are translated into U.S. dollars for reporting purposes.

Effective January 31, 2020, the United Kingdom has formally left the European Union (commonly referred to as “Brexit”). The United Kingdom’s relationship with the European Union will no longer be governed by the European Union Treaties, but instead by the terms of the Withdrawal Agreement agreed between the United Kingdom and the European Union in late 2019. The Withdrawal Agreement provides for a “transition” period, which commenced the moment the United Kingdom left the European Union and is currently set to end on December 31, 2020. At the end of the transition period, there may be significant changes to the United Kingdom’s business environment. While the effects of Brexit will depend on any agreements the United Kingdom makes to retain access to European Union markets or the failure to reach such agreements, the uncertainties created by Brexit, any resolution between the United Kingdom and European Union countries or the failure to reach any such resolutions, could adversely affect the combined company’s relationships with customers, suppliers and could harm the combined company’s business and financial results due to fluctuations in the value of the British pound versus the U.S. dollar, the euro and other currencies. In addition, Brexit could result in delayed deliveries, which may adversely affect the combined company’s internal supply chain and the combined company’s ability to perform under customer contracts.

Natural disasters and unusual weather conditions could have an adverse impact on the combined company’s business.

The combined company’s business could be materially and adversely affected by natural disasters or severe weather conditions. Hurricanes, tropical storms, flash floods, blizzards, cold weather and other natural disasters or severe weather conditions could result in evacuation of personnel, curtailment of services, damage to equipment and facilities, interruption in transportation of products and materials and loss of productivity. For example, certain of the combined company’s manufactured products and components will be manufactured at a single facility, and disruptions in operations or damage to any such facilities could reduce the combined company’s ability to manufacture its products and satisfy customer demand. If the combined company’s customers are unable to operate or are required to reduce operations due to severe weather conditions, the combined company’s business could be adversely affected as a result of curtailed deliveries of its products and services.

The combined company’s indebtedness could adversely affect its financial condition and operating flexibility.

The combined company’s ability to make payments on and to refinance its indebtedness, as well as any future indebtedness that it may incur, will depend upon the level of cash flows generated by its operations, its ability to sell assets, availability under its revolving credit facility and its ability to access the capital markets and/or other sources of financing. The combined company’s ability to generate cash will be subject to general economic, industry, financial, competitive, legislative, regulatory and other factors that are beyond its control. If it is not able to repay or refinance its indebtedness as it becomes due, the combined company may be forced to sell assets or take other disadvantageous actions, including (i) reducing financing in the future for working capital, capital expenditures, acquisitions and general corporate purposes or (ii) dedicating an unsustainable level of cash flow from operations to the payment of principal and interest on the indebtedness. In addition, the combined company’s ability to withstand competitive pressures and to react to changes in the oil and gas industry could be impaired.

 

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The recent global coronavirus pandemic has led to periods of significant volatility in financial, commodities (including oil and gas) and other markets and could harm the business and results of operations for the combined company.

In December 2019, a coronavirus (COVID-19) was reported in China, and has since spread globally. In March 2020, the World Health Organization declared the coronavirus to be a pandemic. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the lasting impact of the coronavirus pandemic on the business of the combined company, and there is no guarantee that efforts by the combined company to address the adverse impacts of the coronavirus will be effective. The impact to date has included periods of significant volatility in financial, commodities and other markets, and has resulted in a significant decline in the trading price of Apergy’s common stock. This volatility, if it continues, could have an adverse impact on the combined company’s business, financial condition and results of operations. In particular, global markets for oil and gas have been and may continue to be impacted by the coronavirus pandemic and/or other events beyond the control of the combined company, and further volatility in commodity prices could have a negative impact on the economies of energy-dominant states in which Apergy and ChampionX conduct, and the combined company will conduct, significant business. As demand for oil and gas has declined as a result of the pandemic, Apergy and ChampionX’s customers have implemented various measures to address the decline in demand, including reducing orders for Apergy and ChampionX products and seeking price concessions.

In addition, the United States and other countries have implemented restrictions to address the pandemic, including disruptions or restrictions on Apergy’s and ChampionX’s employees’ ability to travel, and which could include temporary closures of Apergy’s or ChampionX’s facilities or the facilities of their suppliers or customers. Any disruption of the combined company’s facilities, suppliers or customers would likely impact the combined company’s sales and operating results. The extent to which the coronavirus could impact the combined company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information concerning the severity of COVID-19 and the actions to contain the novel coronavirus or treat its impact, among others.

The ChampionX Business’ subsidiaries are defendants in pending lawsuits alleging negligence and injury resulting from the use of COREXIT dispersant in response to the Deepwater Horizon oil spill, which could expose the ChampionX Business to monetary damages or settlement costs.

As described in “Information about the ChampionX Business—Legal Proceedings—Matters Related to Deepwater Horizon Incident Response,” certain entities that are or will become subsidiaries of ChampionX upon completion of the Transactions (collectively the “COREXIT Defendants”) are among the defendants in a number of class action and individual plaintiff lawsuits arising from the use of COREXIT dispersant in response to the Deepwater Horizon oil spill, which could expose the ChampionX Business to monetary damages or settlement costs. The plaintiffs in these matters have claimed damages under products liability, tort and other theories.

There currently remain three cases pending against the COREXIT Defendants. It is expected that they will be dismissed pursuant to a November 28, 2012 order granting the COREXIT Defendants’ motion for summary judgment. The ChampionX Business cannot predict whether there will be an appeal of the dismissal, the involvement the ChampionX Business might have in these matters in the future or the potential for future litigation. However, although ChampionX believes it has rights to contribution and/or indemnification from third parties in connection with these lawsuits, if an appeal by plaintiffs in these lawsuits is brought and won, these suits could have a material adverse effect on the ChampionX Business and its financial condition, results of operations or cash flows.

The COREXIT Defendants continue to sell the COREXIT oil dispersant product and previously sold product remains in the inventories of individual customers and oil spill response organizations. The ChampionX Business cannot predict the potential for future litigation with respect to such sales or inventory. However, if one or more of such lawsuits are brought and won, these suits could have a material adverse impact on the combined company’s financial results.

 

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Restrictions imposed by Apergy and the combined company’s debt instruments may limit the ability of the combined company’s subsidiaries to operate their business and to finance their future operations or capital needs or to engage in other business activities.

The terms of the combined company’s debt instruments restrict certain of its subsidiaries from engaging in specified types of transactions. These covenants restrict the ability of Apergy, and its restricted subsidiaries, and upon consummation of the Merger, the combined company and its restricted subsidiaries, among other things, to:

 

   

incur or guarantee additional indebtedness;

 

   

pay dividends on capital stock or redeem, repurchase or retire capital stock or indebtedness, as applicable;

 

   

make investments, loans, advances and acquisitions;

 

   

create restrictions on the payment of dividends or other amounts by such restricted subsidiaries or subsidiaries, as the case may be;

 

   

engage in transactions with the combined company’s affiliates;

 

   

sell assets, including capital stock of subsidiaries;

 

   

consolidate or merge; and

 

   

create liens.

In addition, the debt instruments contain certain financial maintenance covenants. Apergy and the combined company’s ability to comply with these restrictions can be affected by events beyond its control, and Apergy or the combined company may not be able to maintain compliance with them. A breach of any of these covenants would be an event of default.

In the event of a default under any of the debt instruments, the lenders could elect to declare all amounts outstanding under such debt instruments to be immediately due and payable, or in the case of Apergy’s revolving credit facility, may terminate their commitments to lend additional money. If the indebtedness under any of Apergy’s debt instruments were to be accelerated, Apergy and the combined company’s assets may not be sufficient to repay such indebtedness in full. In addition, Apergy’s senior secured credit facilities are secured by substantially all of Apergy’s and its domestic subsidiaries’ assets. If an event of default occurs under Apergy’s debt instruments, the lenders could exercise their rights under the related security documents, and an event of default may be triggered under other debt instruments. Any acceleration of amounts due under Apergy’s debt instruments or the substantial exercise by the lenders of their rights under the security documents would have a material adverse effect on Apergy or the combined company.

Apergy has identified material weaknesses in internal control over financial reporting and, as a result, its internal control over financial reporting and disclosure controls and procedures are not effective.

Apergy has identified material weaknesses in its internal control over financial reporting as a result of which Apergy management has concluded that its internal control over financial reporting and its disclosure controls and procedures were not effective as of December 31, 2019. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. These material weaknesses relate to (a) the ineffective control environment due to a lack of a sufficient complement of personnel with the appropriate level of knowledge, experience and training at Apergy’s Artificial Lift business, (b) ineffective risk assessment component of internal control related to Apergy’s ESP subsidiary (which is part of the Artificial Lift business) as controls were not appropriately designed to ensure that the subsidiary, which was experiencing significant growth and turnover of personnel, had the proper resources to operate a complex business model, (c) a lack of controls designed and maintained within certain of the Artificial Lift businesses over the completeness, accuracy, occurrence or cut-off of revenue and within ESP over the valuation of accounts receivable, (d) a lack of controls maintained to ensure that journal

 

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entries were properly prepared with appropriate supporting documentation or were reviewed and approved appropriately to ensure the accuracy of journal entries at ESP, (e) a lack of controls designed and maintained over the completeness, accuracy, and existence or presentation and disclosure of inventory and fixed assets at ESP, and (f) a lack of controls designed and maintained over user roles within the general ledger system across Apergy, which defines the actions an individual can perform within the system.

Apergy management is currently in the process of developing and implementing a remediation plan to address these material weaknesses. Apergy expects to incur significant additional expenses in connection with implementing remedial measures. If these remedial measures are insufficient to address the material weaknesses, or if additional material weaknesses or significant deficiencies in its internal control over financial reporting are identified or subsequently arise, Apergy’s or the combined company’s consolidated financial statements may contain material misstatements, and Apergy or the combined company may be required to restate its financial results, which could have a material adverse effect on its financial condition, results of operations or cash flows, restrict the ability to access the capital markets, require significant resources to correct the material weaknesses or deficiencies, subject Apergy or the combined company to fines, penalties or judgments, harm its reputation or otherwise cause a decline in investor confidence and cause a decline in the market price of its stock.

If securities or industry analysts who cover Apergy, Apergy’s business or Apergy’s market publish a negative report or change their recommendations regarding Apergy’s stock adversely, Apergy’s stock price and trading volume could decline.

The trading market for Apergy common stock is influenced by the research and reports that industry or securities analysts publish about Apergy, Apergy’s business, Apergy’s market or Apergy’s competitors. If any of the analysts who cover Apergy or may cover Apergy in the future publish a negative report or change their recommendation regarding Apergy’s stock adversely, or provide more favorable relative recommendations about Apergy’s competitors, Apergy’s stock price would likely decline.

Certain stockholders could attempt to influence changes within Apergy which could adversely affect Apergy’s operations, financial condition and the value of Apergy common stock.

Apergy’s stockholders may from time-to-time seek to acquire a controlling stake in Apergy, engage in proxy solicitations, advance stockholder proposals or otherwise attempt to effect changes. Campaigns by stockholders to effect changes at publicly-traded companies are sometimes led by investors seeking to increase short-term stockholder value through actions such as financial restructuring, increased debt, special dividends, stock repurchases or sales of assets or the entire company. Responding to proxy contests and other actions by activist stockholders can be costly and time-consuming, and could disrupt Apergy’s operations and divert the attention of the Apergy Board of Directors and senior management from the pursuit of its business strategies. These actions could adversely affect Apergy’s operations, financial condition and the value of Apergy common stock.

Anti-takeover provisions contained in Apergy’s certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

Apergy’s certificate of incorporation, bylaws and Delaware law contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by the Apergy Board of Directors. Apergy’s corporate governance documents include provisions:

 

   

authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to Apergy common stock;

 

   

limiting the liability of, and providing indemnification to, Apergy’s directors and officers;

 

   

limiting the ability of Apergy’s stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;

 

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requiring advance notice of stockholder proposals for business to be conducted at meetings of Apergy’s stockholders and for nominations of candidates for election to the Apergy Board of Directors;

 

   

controlling the procedures for the conduct and scheduling of Apergy Board of Directors and stockholder meetings;

 

   

providing the Apergy Board of Directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings;

 

   

restricting the forum for certain litigation brought against Apergy to Delaware; and

 

   

providing the Apergy Board of Directors with the exclusive right to determine the number of directors on the Apergy Board of Directors and the filling of any vacancies or newly created seats on the Apergy Board of Directors.

These provisions, alone or together, could delay hostile takeovers and changes in control of Apergy or changes in Apergy’s management.

As a Delaware corporation, Apergy is also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which generally prevents certain interested stockholders, including a person who beneficially owns 15% or more of Apergy’s outstanding common stock, from engaging in certain business combinations with Apergy within three years after the person becomes an interested stockholder unless certain approvals are obtained. Any provision of Apergy’s certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for Apergy’s stockholders to receive a premium for their shares of Apergy common stock, and could also affect the price that some investors are willing to pay for Apergy common stock.

The Apergy certificate of incorporation provides that the Court of Chancery of the State of Delaware shall be the exclusive forum for certain disputes between Apergy and its stockholders, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with Apergy. If this exclusive forum provision is found to be inapplicable or unenforceable, Apergy may not achieve the intended benefits of such provision.

The Apergy certificate of incorporation provides that, unless Apergy’s Board of Directors otherwise determines, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for each of the following: (1) any derivative action or proceeding brought on behalf of Apergy, (2) any action asserting a claim for breach of a fiduciary duty owed by any director, officer, or stockholder, creditor or constituent of Apergy to Apergy or its stockholders, (3) any action asserting a claim against Apergy or any director or officer of Apergy arising pursuant to any provision of the DGCL, Apergy’s certificate of incorporation or Apergy’s bylaws or (4) any action against Apergy or any director or officer of Apergy asserting a claim governed by the internal affairs doctrine.

This forum selection provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable or cost-efficient for disputes with Apergy or any director, officer, employee or agent of Apergy, which may discourage such lawsuits, or increase the costs to a stockholder of bringing such lawsuits, against Apergy and such persons.

The enforceability of forum selection provisions in other companies’ certificates of incorporation, bylaws or similar governing documents has been challenged in legal proceedings, and it is possible that in connection with any action a court could find the forum selection provision contained in Apergy’s certificate of incorporation to be inapplicable or unenforceable in such action. If a court were to find this forum selection provision inapplicable or unenforceable, Apergy may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely impact Apergy’s operating or financial condition or performance.

See the section titled “Comparison of the Rights of Stockholders Before and After The Transactions—Exclusive Forum” beginning on page 244 for more information on this forum selection provision.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including information incorporated by reference into this prospectus, includes “forward-looking statements” as that term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, including statements regarding the proposed Transactions between Apergy, ChampionX and Ecolab. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “forecast,” “outlook,” “target,” “endeavor,” “seek,” “predict,” “intend,” “strategy,” “plan,” “may,” “could,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” or the negative thereof or variations thereon or similar terminology generally intended to identify forward-looking statements. All statements, other than historical facts, including, but not limited to, statements regarding the expected timing and structure of the proposed Transactions, the ability of the parties to complete the proposed Transactions, the expected benefits of the proposed Transactions, including future financial and operating results and strategic benefits, the tax consequences of the proposed Transactions, and the combined company’s plans, objectives, expectations and intentions, legal, economic and regulatory conditions, and any assumptions underlying any of the foregoing, are forward looking statements.

Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others:

 

   

that one or more conditions to closing the Merger or the Distribution (including this Exchange Offer), including certain regulatory approvals, may not be satisfied or waived on a timely basis or otherwise, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the proposed Transactions, may require conditions, limitations or restrictions in connection with such approvals or that the required approval by the stockholders of Apergy may not be obtained;

 

   

the risk that the proposed Transactions may not be completed on the terms or in the time frame expected by Apergy, ChampionX or Ecolab, or at all;

 

   

unexpected costs, charges or expenses resulting from the proposed Transactions;

 

   

uncertainty of the expected financial performance of the combined company following completion of the proposed Transactions;

 

   

risks related to disruption of management time from ongoing business operations due to the proposed Transactions;

 

   

failure to realize the anticipated benefits of the proposed Transactions, including as a result of delay in completing the proposed Transactions or integrating the businesses of Apergy and ChampionX, or at all;

 

   

the ability of the combined company to implement its business strategy;

 

   

difficulties and delays in the combined company achieving revenue and cost synergies;

 

   

the occurrence of any event that could give rise to termination of the proposed Transactions;

 

   

the risk that stockholder litigation in connection with the proposed Transactions or other settlements or investigations may affect the timing or occurrence of the proposed Transactions or result in significant costs of defense, indemnification and liability;

 

   

the effects of external events on the economy including COVID-19 or other pandemics;

 

   

evolving legal, regulatory and tax regimes;

 

   

changes in general economic and/or industry-specific conditions (including actions taken by OPEC);

 

   

actions by third parties, including government agencies;

 

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Apergy’s ability to remediate the material weaknesses in internal control over financial reporting described in Part II, Item 9A—Controls and Procedures, in Apergy’s Annual Report on Form 10-K for the year ended December 31, 2019; and

 

   

other risk factors detailed from time to time in Apergy’s and Ecolab’s reports filed with the SEC, including Apergy’s and Ecolab’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other documents filed with the SEC.

In light of these risks, uncertainties, assumptions and other factors, the forward-looking statements discussed in this prospectus may not occur. Other unknown or unpredictable factors could also have a material adverse effect on each of Ecolab’s, ChampionX’s and Apergy’s actual future results, performance, or achievements. For a further discussion of these and other risks and uncertainties, see the section of this prospectus entitled “Risk Factors.” As a result of the foregoing, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus. None of Ecolab, ChampionX or Apergy undertakes, and each expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events, or changes in its respective expectations, except as required by law.

 

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EXCHANGE OFFER

Terms of This Exchange Offer

General

Ecolab is offering to exchange all shares of ChampionX common stock that are owned by Ecolab for shares of Ecolab common stock, at an exchange ratio to be calculated in the manner described below, on the terms and subject to the conditions and limitations described below and in the letter of transmittal and the exchange and transmittal information booklet, each filed as an exhibit to the registration statement of which this prospectus forms a part, that are validly tendered and not properly withdrawn before 12:01 a.m., New York City time, on June 3, 2020, unless this Exchange Offer is extended or terminated. The last day on which tenders will be accepted, whether on June 3, 2020 or any later date to which this Exchange Offer is extended, is referred to in this prospectus as the “expiration date.” You may tender all, some or none of your shares of Ecolab common stock.

Ecolab currently expects that approximately 122.0 million shares of ChampionX common stock will be available in this Exchange Offer. The number of shares of Ecolab common stock that will be accepted for exchange if this Exchange Offer is completed will depend on the final exchange ratio, the number of shares of ChampionX common stock offered and the number of shares of Ecolab common stock tendered.

Ecolab’s obligation to complete this Exchange Offer is subject to important conditions that are described in “—Conditions to Consummation of this Exchange Offer.”

For each share of Ecolab common stock that you validly tender in this Exchange Offer and do not properly withdraw and that is accepted for exchange, you will receive a number of shares of ChampionX common stock at a 10% discount to the per-share value of Apergy common stock, calculated as set forth below, subject to an upper limit of 24.6667 shares of ChampionX common stock per share of Ecolab common stock. Stated another way, subject to the upper limit described below, for each $100 of your Ecolab common stock accepted for exchange in this Exchange Offer, you will receive approximately $111.11 of ChampionX common stock.

The final calculated per-share value and per-share value, as applicable, will be equal to:

 

  1.

with respect to Ecolab common stock, the simple arithmetic average of the daily VWAP of Ecolab common stock on the NYSE for each of the Valuation Dates, as reported by Bloomberg L.P. through the Price and Volume Dashboard for “ECL.”

 

  2.

with respect to ChampionX common stock, the simple arithmetic average of the daily VWAP of Apergy common stock on the NYSE for each of the Valuation Dates, as reported by Bloomberg L.P. through the Price and Volume Dashboard for “APY.”

The daily VWAP provided by Bloomberg L.P. may be different from other sources of volume-weighted average prices or investors’ or security holders’ own calculations of volume-weighted average prices. Ecolab will determine such calculations of the per-share value of Ecolab common stock and the per-share value of ChampionX common stock, and such determination will be final. Ecolab will maintain a website at http://www.championxexchangeoffer.com that provides the daily VWAP of both Ecolab common stock and Apergy common stock for each day during this Exchange Offer.

If the upper limit on the number of shares of ChampionX common stock that can be received for each share of Ecolab common stock tendered and accepted for exchange is in effect, then the exchange ratio will be fixed at the limit.

Upper Limit

The number of shares of ChampionX common stock you can receive in this Exchange Offer is subject to an upper limit of 24.6667 shares of ChampionX common stock for each share of Ecolab common stock accepted for exchange in this Exchange Offer. If the upper limit is in effect, a stockholder will receive less (and could receive much less) than $111.11 of ChampionX common stock for each $100 of Ecolab common stock that the stockholder

 

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validly tenders, that is not properly withdrawn and that is accepted for exchange in this Exchange Offer. This upper limit was calculated based on a 21% discount for shares of ChampionX common stock based on the average of the daily VWAPs of Ecolab common stock and Apergy common stock on April 27, 2020, April 28, 2020, and April 29, 2020 (the last three full trading days ending on the second to last full trading day prior to commencement of this Exchange Offer). Ecolab set this limit to ensure that an unusual or unexpected drop in the trading price of Apergy common stock, relative to the trading price of Ecolab common stock, would not result in an unduly high number of shares of ChampionX common stock being exchanged for each share of Ecolab common stock accepted for exchange in this Exchange Offer.

Pricing Mechanism

The terms of this Exchange Offer are designed to result in your receiving $111.11 of ChampionX common stock for each $100 of your Ecolab common stock validly tendered, not properly withdrawn and accepted for exchange in this Exchange Offer based on the calculated per-share values described above. This Exchange Offer does not provide for a minimum exchange ratio because a minimum exchange ratio could result in the shares of ChampionX common stock exchanged for each $100 of Ecolab common stock being valued higher than approximately $111.11. Regardless of the final exchange ratio, the terms of this Exchange Offer would always result in your receiving approximately $111.11 of ChampionX common stock for each $100 of your Ecolab common stock validly tendered, not properly withdrawn and accepted for exchange in this Exchange Offer, so long as the upper limit is not in effect. See the table on page 68 for purposes of illustration.

Subject to the upper limit described above, for each $100 of your Ecolab common stock accepted for exchange in this Exchange Offer, you will receive approximately $111.11 of ChampionX common stock. The following formula will be used to calculate the number of shares of ChampionX common stock you will receive for your shares of Ecolab common stock accepted for exchange in this Exchange Offer:

 

Number of shares of ChampionX common stock   =   Number of shares of Ecolab common stock tendered and accepted for exchange, multiplied by the lesser of:  

(a)

24.6667 (the upper limit)

  and  

(b)

100% of the calculated per-share value of Ecolab common stock divided by 90% of the calculated per-share value of ChampionX common stock

(calculated as described below)

The calculated per-share value of a share of Ecolab common stock for purposes of this Exchange Offer will equal the simple arithmetic average of the daily VWAP of Ecolab common stock on the NYSE on each of the Valuation Dates. The calculated per-share value of a share of ChampionX common stock for purposes of this Exchange Offer will equal the simple arithmetic average of the daily VWAP of Apergy common stock on the NYSE on each of the Valuation Dates.

To help illustrate the way this calculation works, below are two examples:

Example 1: Assuming that the average of the daily VWAP on the Valuation Dates is $193.2828 per share of Ecolab common stock and $9.9294 per share of Apergy common stock, you would receive 21.6285 (193.2828 divided by 90% of 9.9294) shares of ChampionX common stock for each share of your Ecolab common stock accepted for exchange in this Exchange Offer. In this example, the upper limit of 24.6667 shares of ChampionX common stock for each share of Ecolab common stock would not apply.

Example 2: Assuming that the average of the daily VWAP on the Valuation Dates is $222.2752 per share of Ecolab common stock and $8.4400 per share of Apergy common stock, the upper limit would apply, and you would only

 

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receive 24.6667 shares of ChampionX common stock for each share of your Ecolab common stock accepted for exchange in this Exchange Offer, because the upper limit is less than 29.2621 (222.2752 divided by 90% of 8.4400) shares of ChampionX common stock for each share of Ecolab common stock.

Indicative Per-Share Values

Indicative exchange ratios, calculated per-share values of Ecolab common stock and calculated per-share values of ChampionX common stock will be made available on each trading day during this Exchange Offer prior to the third Valuation Date, commencing after the close of trading on the third trading day during this Exchange Offer, and may be obtained by contacting the information agent at the toll-free number provided on the back cover of this prospectus or at the website will be maintained at http://www.championxexchangeoffer.com.

Until the first Valuation Date, the indicative calculated per-share values will be calculated as though that day were the expiration date of this Exchange Offer, of (i) Ecolab common stock, which will equal the simple arithmetic average of the daily VWAP of Ecolab common stock, as calculated by Ecolab, on each of the three most recent prior full trading days and (ii) ChampionX common stock, which will equal the simple arithmetic average of the daily VWAP of Apergy common stock, as calculated by Ecolab, on each of the three most recent prior full trading days.

On the first two Valuation Dates, when the values of Ecolab common stock and ChampionX common stock are calculated for the purposes of this Exchange Offer, the indicative calculated per-share values of Ecolab common stock and the indicative calculated per-share values of ChampionX common stock, as calculated by Ecolab, will each equal (i) after the close of trading on the NYSE on the first Valuation Date, the VWAPs for that day, and (ii) after the close of trading on the NYSE on the second Valuation Date, the VWAPs for that day averaged with the VWAPs on the first Valuation Date. On the first two Valuation Dates, the indicative exchange ratios will be updated no later than 4:30 p.m., New York City time. No indicative exchange ratio will be published or announced on the third Valuation Date, but the final exchange ratio will be announced by press release and available on the website by 9:00 a.m., New York City time, on the second trading day immediately preceding the expiration date of this Exchange Offer.

Final Exchange Ratio

The final exchange ratio that shows the number of shares of ChampionX common stock that you will receive for each share of your Ecolab common stock accepted for exchange in this Exchange Offer will be available at http://www.championxexchangeoffer.com and announced by press release by 9:00 a.m., New York City time, on the second to last full trading day prior to the expiration date (that is, on June 1, 2020, unless this Exchange Offer is extended or terminated).

After that time, you may also contact the information agent to obtain the final exchange ratio at its toll-free number provided on the back cover of this prospectus.

Each of the daily VWAPs, calculated per-share values and the final exchange ratio will be rounded to four decimal places.

If Ecolab common stock or Apergy common stock does not trade on any of the Valuation Dates, the calculated per-share value of Ecolab common stock and the calculated per-share value of ChampionX common stock will be determined using the daily VWAP of Ecolab common stock and Apergy common stock on the preceding full trading day or days, as the case may be, on which both Ecolab common stock and Apergy common stock did trade.

Since the final exchange ratio will be announced by 9:00 a.m., New York City time, on the second to last full trading day prior to the expiration date of this Exchange Offer, you will be able to tender or withdraw your shares

 

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of Ecolab common stock after the final exchange ratio is determined. For more information on validly tendering and properly withdrawing your shares, see “—Procedures for Tendering” and “—Withdrawal Rights.”

For the purposes of illustration, the table below indicates the number of shares of ChampionX common stock that you would receive per share of your Ecolab common stock accepted for exchange in this Exchange Offer, calculated on the basis described above and taking into account the upper limit described above, assuming a range of averages of the daily VWAP of Ecolab common stock and Apergy common stock on the Valuation Dates. The first row of the table below shows the indicative calculated per-share value of Ecolab common stock, the indicative calculated per-share value of ChampionX common stock and the indicative exchange ratio that would have been in effect (and the corresponding indicative calculated value ratio) following the official close of trading on the NYSE on April 29, 2020, based on the daily VWAPs of Ecolab common stock and Apergy common stock on April 27, 2020, April 28, 2020 and April 29, 2020. The table also shows the effects of a 15% increase or decrease in either or both the calculated per-share value of Ecolab common stock and the calculated per-share value of ChampionX common stock based on changes relative to the values of April 29, 2020.

 

Ecolab Common
Stock

 

Apergy Common Stock

  Calculated Per-
Share Value of
Ecolab
Common Stock

(A)
  Calculated Per-Share
Value of ChampionX
Common Stock
(Before the 10%
Discount)

(B)
    Shares of ChampionX
Common Stock To Be
Received Per Share of
Ecolab Common
Stock Tendered and
Accepted for
Exchange (the
Exchange Ratio)

(C)
    Calculated Value
Ratio

(D)
 

As of April 29, 2020

  As of April 29, 2020   $193.2828     $9.9294       21.6285       1.111  

Down 15%

  Up 15%   $164.2904   $ 11.4188       15.9863       1.111  

Down 15%

  Unchanged   $164.2904   $ 9.9294       18.3842       1.111  

Down 15%

  Down 15%   $164.2904   $ 8.4400       21.6285       1.111  

Unchanged

  Up 15%   $193.2828   $ 11.4188       18.8074       1.111  

Unchanged

  Down 15%(1)(2)   $193.2828   $ 8.4400       24.6667       1.077  

Up 15%

  Up 15%   $222.2752   $ 11.4188       21.6285       1.111  

Up 15%

  Unchanged(1)(3)   $222.2752   $ 9.9294       24.6667       1.102  

Up 15%

  Down 15%(1)(4)   $222.2752   $ 8.4400       24.6667       0.937  

 

(A)

As of April 29, 2020, the calculated per-share value of Ecolab common stock equals the simple arithmetic average of daily VWAPs on each of the three most recent prior trading dates ($185.2630, $196.6264 and $197.9590).

(B)

As of April 29, 2020, the calculated per-share value of ChampionX common stock equals the simple arithmetic average of daily Apergy VWAPs on each of the three most recent prior trading dates ($8.5170, $10.4585 and $10.8128).

(C)

Equal to (i) the amount calculated as [A / (B*(1-10%))] or (ii) the upper limit, whichever is less.

(D)

The calculated value ratio equals (i) the calculated per-share value of ChampionX common stock (B) multiplied by the exchange ratio (C), divided by (ii) the calculated per-share value of Ecolab common stock (A), rounded to three decimal places.

(1)

In this scenario, Ecolab would announce that the upper limit on the number of shares of ChampionX common stock that can be received for each share of Ecolab common stock tendered is in effect no later than 9:00 a.m., New York City time, on the second trading day prior to the expiration date and that the exchange ratio will be fixed at the upper limit.

(2)

In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 25.4453 shares of ChampionX common stock per share of Ecolab common stock validly tendered and accepted in this Exchange Offer.

(3)

In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 24.8728 shares of ChampionX common stock per share of Ecolab common stock validly tendered and accepted in this Exchange Offer.

 

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(4)

In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 29.2621 shares of ChampionX common stock per share of Ecolab common stock validly tendered and accepted in this Exchange Offer. In this scenario, tendering Ecolab stockholders would receive less than $100 in value of ChampionX common stock for each $100 in value of Ecolab common stock.

For example, if the calculated per-share value of Ecolab common stock was $210.31 (the highest closing price for Ecolab common stock on the NYSE during the three-month period ending on the second to last full trading day prior to commencement of this Exchange Offer) and the calculated per-share value of ChampionX common stock was $3.02 (the lowest closing price for Apergy common stock on the NYSE during that three-month period), the value of ChampionX common stock, based on the Apergy common stock price, received for shares of Ecolab common stock accepted for exchange in this Exchange Offer would be approximately $35 for each $100 of Ecolab common stock accepted for exchange in this Exchange Offer.

If the trading price of Ecolab common stock were to increase during the last two full trading days prior to the expiration of this Exchange Offer, the average per-share value of Ecolab common stock used to calculate the exchange ratio would likely be lower than the closing price of Ecolab common stock on the expiration date of this Exchange Offer. As a result, you would receive fewer shares of ChampionX common stock and, therefore, effectively fewer shares of Apergy common stock, for each $100 of Ecolab common stock than you would have received if that per-share value were calculated on the basis of the closing price of Ecolab common stock on the expiration date of this Exchange Offer. Similarly, if the trading price of Apergy common stock were to decrease during the last two full trading days prior to the expiration of this Exchange Offer, the average per-share value of ChampionX common stock used to calculate the exchange ratio would likely be higher than the closing price of Apergy common stock on the expiration date of this Exchange Offer. This could also result in your receiving fewer shares of ChampionX common stock and, therefore, effectively fewer shares of Apergy common stock, for each $100 of your Ecolab common stock than you would have received if that per-share value were calculated on the basis of the closing price of Apergy common stock on the expiration date of this Exchange Offer.

The number of shares of Ecolab common stock that may be accepted for exchange in this Exchange Offer may be subject to proration. Depending on the number of shares of Ecolab common stock validly tendered, and not properly withdrawn in this Exchange Offer, and the final exchange ratio, determined as described above, Ecolab may have to limit the number of shares of Ecolab common stock that it accepts for exchange in this Exchange Offer through a proration process. Any proration of the number of shares accepted for exchange in this Exchange Offer will be determined on the basis of the proration mechanics described below under “—Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of Ecolab Common Stock.”

This prospectus and related documents are being sent to persons who directly held shares of Ecolab common stock on May 1, 2020 and brokers, banks and similar persons whose names or the names of whose nominees appear on Ecolab’s stockholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing for subsequent transmittal to beneficial owners of shares of Ecolab common stock. This prospectus and related documents are also being sent to participants in the Ecolab Savings Plans whose plan accounts were invested in Ecolab common stock on April 24, 2020, and also persons who acquired shares of Ecolab common stock through the Ecolab Stock Purchase Plan.

Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of Ecolab Common Stock

If, upon the expiration of this Exchange Offer, Ecolab stockholders have validly tendered and not properly withdrawn more shares of Ecolab common stock than Ecolab is able to accept for exchange (taking into account the exchange ratio and the total number of shares of ChampionX common stock owned by Ecolab), Ecolab will accept for exchange the Ecolab common stock validly tendered and not properly withdrawn by each tendering stockholder on a pro rata basis, based on the proportion that the total number of shares of Ecolab common stock to be accepted for exchange bears to the total number of shares of Ecolab common stock validly tendered and not properly withdrawn (rounded to the nearest whole number of shares of Ecolab common stock), and subject to any adjustment necessary to ensure the exchange of all shares of ChampionX common stock being offered by Ecolab in this Exchange Offer, except for tenders of odd lots, as described below.

 

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Except as otherwise provided in this section, beneficial holders (other than participants in any of the Ecolab Savings Plans) of fewer than 100 shares of Ecolab common stock who validly tender all of their shares will not be subject to proration if this Exchange Offer is oversubscribed. Beneficial holders of 100 or more shares of Ecolab common stock are not eligible for this preference.

Any beneficial holder (other than participants in any of the Ecolab Savings Plans) of fewer than 100 shares of Ecolab common stock who wishes to tender all of such beneficial holder’s shares of Ecolab common stock in this Exchange Offer must complete the section entitled “Proration/Odd-Lot” on the letter of transmittal. If your odd-lot shares are held by a broker for your account, you can contact your broker and request the preferential treatment.

Ecolab will announce the preliminary proration factor for this Exchange Offer at http://www.championxexchangeoffer.com and separately by press release promptly after the expiration of this Exchange Offer. Upon determining the number of shares of Ecolab common stock validly tendered for exchange, Ecolab will announce the final results of this Exchange Offer, including the final proration factor for this Exchange Offer.

Any shares of Ecolab common stock not accepted for exchange in this Exchange Offer as a result of proration or otherwise will be returned to the tendering stockholder promptly after the final proration factor for this Exchange Offer is determined.

For purposes of this Exchange Offer, a “business day” means any day other than a Saturday, Sunday or U.S. federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time.

Fractional Shares

Fractional shares of ChampionX common stock will be issued in the Distribution. ChampionX common stock (including the fractional shares) will be held by the Exchange Offer agent for the benefit of Ecolab stockholders whose shares of Ecolab common stock are accepted for exchange in this Exchange Offer and, if this Exchange Offer is completed but not fully subscribed, for distribution in the clean-up spin-off. If this Exchange Offer is terminated by Ecolab without the exchange of shares (but the conditions to consummation of the Transactions have otherwise been satisfied), Ecolab intends to distribute all shares (including the fractional shares) of ChampionX common stock owned by Ecolab on a pro rata basis to holders of Ecolab common stock, with a record date to be announced by Ecolab. Following the consummation of this Exchange Offer, Merger Sub will be merged with and into ChampionX, whereby ChampionX will continue as the surviving corporation and a wholly owned subsidiary of Apergy. Each share of ChampionX common stock outstanding immediately prior to the effective time of the Merger (except for shares of ChampionX common stock held by ChampionX, which shares will be canceled and cease to exist, and no consideration will be delivered in exchange therefor) will be converted into the right to receive a number of duly authorized, validly issued, fully paid and nonassessable shares of Apergy common stock equal to the Merger Exchange Ratio, such that immediately following the Merger, ChampionX equityholders will own, in the aggregate, approximately 62% of the issued and outstanding Apergy common stock on a fully diluted basis and Apergy equityholders will own, in the aggregate, approximately 38% of the issued and outstanding Apergy common stock on a fully diluted basis. In this conversion of shares of ChampionX common stock into shares of Apergy common stock, no fractional shares of Apergy common stock will be delivered to holders of shares of ChampionX common stock. Instead, holders of shares of ChampionX common stock who would otherwise be entitled to receive a fractional share of Apergy common stock will receive in cash the dollar amount (rounded to the nearest whole cent) determined by multiplying such fraction by the closing price of Apergy common stock on the NYSE on the last business day prior to the effective time of the Merger. The amount received by such holders of shares of ChampionX common stock will be net of any required withholding taxes.

Exchange of Shares of Ecolab Common Stock

Upon the terms and subject to the conditions of this Exchange Offer (including, if this Exchange Offer is extended or amended, the terms and conditions of the extension or amendment), Ecolab will accept for exchange and will

 

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exchange, for shares of ChampionX common stock owned by Ecolab, the Ecolab common stock validly tendered, and not properly withdrawn, prior to the expiration of this Exchange Offer, promptly after the expiration date.

The exchange of Ecolab common stock tendered and accepted for exchange pursuant to this Exchange Offer will be made only after timely receipt by the Exchange Offer agent of (a) (i) share certificates representing all validly tendered shares of Ecolab common stock (other than DRS shares), in the proper form for transfer or (ii) in the case of shares delivered by book-entry transfer through The Depository Trust Company, confirmation of a book-entry transfer of those shares of Ecolab common stock in the Exchange Offer agent’s account at The Depository Trust Company, in each case pursuant to the procedures set forth in the section below entitled “—Procedures for Tendering,” (b) the letter of transmittal for shares of Ecolab common stock, properly completed and duly executed (which eligible holders of DRS shares may complete through the Exchange Offer agent’s election website), with any required signature guarantees, or, in the case of a book-entry transfer through The Depository Trust Company, an agent’s message and (c) any other required documents.

For purposes of this Exchange Offer, Ecolab will be deemed to have accepted for exchange, and thereby exchanged, shares of Ecolab common stock validly tendered and not properly withdrawn if and when Ecolab notifies the Exchange Offer agent of its acceptance of the tenders of those shares of Ecolab common stock pursuant to this Exchange Offer.

Upon the consummation of this Exchange Offer, Ecolab will deliver to the Exchange Offer agent a book-entry authorization representing (a) all of the shares of ChampionX common stock being exchanged in this Exchange Offer, with instructions to hold those shares of ChampionX common stock as agent for the holders of shares of Ecolab common stock validly tendered, not properly withdrawn and accepted for exchange in this Exchange Offer and (b) in the case of the clean-up spin-off, if any, all of the shares of ChampionX common stock being distributed in the clean-up spin-off to Ecolab stockholders whose shares of Ecolab common stock remain outstanding after the consummation of this Exchange Offer (as described below under “—Distribution of ChampionX Common Stock Remaining After This Exchange Offer”), with instructions to hold those shares of ChampionX common stock as agent for such Ecolab stockholders. Prior to the effective time of the Merger, Apergy will deposit with the Exchange Offer agent for the benefit of persons who received shares of ChampionX common stock in this Exchange Offer (or in the clean-up spin-off, if applicable) evidence in book-entry form representing the shares of Apergy common stock issuable in the Merger.

Upon surrender of the documents required by the Exchange Offer agent, duly executed, each former holder of shares of ChampionX common stock will receive from the Exchange Offer agent in exchange therefor shares of Apergy common stock and/or cash in lieu of fractional shares of Apergy common stock, as the case may be. You will not receive any interest on any cash paid to you, even if there is a delay in making the payment.

If Ecolab does not accept for exchange any tendered shares of Ecolab common stock for any reason pursuant to the terms and conditions of this Exchange Offer, the Exchange Offer agent (a) in the case of shares of Ecolab common stock held in certificated form, will return certificates representing such shares without expense to the tendering stockholder and (b) in the case of shares tendered by book-entry transfer pursuant to the procedures set forth below in the section entitled “—Procedures for Tendering,” will credit such shares to an account maintained within The Depository Trust Company, in each case promptly following expiration or termination of this Exchange Offer.

Procedures for Tendering

Shares Held in Certificated Form/Book-Entry DRS

If you hold certificates representing shares of Ecolab common stock, you must deliver to the Exchange Offer agent at the applicable address provided on the back cover of this prospectus, a properly completed and duly executed letter of transmittal, along with any required signature guarantees and any other required documents and the certificates representing the shares of Ecolab common stock validly tendered.

 

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If you hold DRS shares of Ecolab common stock you must deliver to the Exchange Offer agent pursuant to one of the methods set forth in the letter of transmittal, a properly completed and duly executed letter of transmittal, along with any required signature guarantees and any other required documents. Since certificates are not issued for DRS shares, you do not need to deliver any certificates representing those shares to the Exchange Offer agent.

Shares Held Through a Bank, Broker or Other Nominee

If you hold shares of Ecolab common stock through a bank, broker or other nominee and wish to tender your shares of Ecolab common stock in this Exchange Offer, you should follow the instructions sent to you separately by that institution. In this case, you should not use a letter of transmittal to direct the tender of your Ecolab common stock. If that institution holds shares of Ecolab common stock through The Depository Trust Company, it must notify The Depository Trust Company and cause it to transfer the shares into the Exchange Offer agent’s account in accordance with The Depository Trust Company’s procedures. The institution must also ensure that the Exchange Offer agent receives an agent’s message from The Depository Trust Company confirming the book-entry transfer of your Ecolab common stock. A tender by book-entry transfer will be completed upon receipt by the Exchange Offer agent of an agent’s message, book-entry confirmation from The Depository Trust Company and any other required documents.

The term “agent’s message” means a message, transmitted by The Depository Trust Company to, and received by, the Exchange Offer agent and forming a part of a book-entry confirmation, which states that The Depository Trust Company has received an express acknowledgment from the participant in The Depository Trust Company tendering the shares of Ecolab common stock which are the subject of the book-entry confirmation, that the participant has received and agrees to be bound by the terms of the letter of transmittal (including the instructions thereto) and that Ecolab may enforce that agreement against the participant.

The Exchange Offer agent will establish an account with respect to the shares of Ecolab common stock at The Depository Trust Company for purposes of this Exchange Offer, and any U.S. eligible institution that is a participant in The Depository Trust Company may make book-entry delivery of shares of Ecolab common stock by causing The Depository Trust Company to transfer such shares into the Exchange Offer agent’s account at The Depository Trust Company in accordance with The Depository Trust Company’s procedure for the transfer. Delivery of documents to The Depository Trust Company does not constitute delivery to the Exchange Offer agent.

Shares Held in Any of the Ecolab Savings Plans or the Ecolab Stock Purchase Plan

Participants in the Ecolab Savings Plans and the Ecolab Stock Purchase Plan should follow the special instructions that are being sent to them by or on behalf of their applicable plan administrator. Such participants should not use the letter of transmittal to direct the tender of shares of Ecolab common stock held in these plans, but should instead use the Exchange Offer election form (i.e., the Trustee Direction Letter for the Ecolab Savings Plans or the Election Form for the Ecolab Stock Purchase Plan) provided to them by or on behalf of their applicable plan administrator. Such participants may direct the applicable plan trustee to tender all, some or none of the shares of Ecolab common stock (or units in respect of shares of Ecolab common stock) allocated to their Ecolab Savings Plan and Ecolab Stock Purchase Plan accounts, subject to any limitations set forth in the special instructions provided to them, by the deadline specified in the special instructions sent by or on behalf of the applicable plan administrator.

If this Exchange Offer is oversubscribed, the number of shares of Ecolab common stock that you elect to exchange will be reduced on a pro rata basis. Any proration of the number of shares accepted for exchange in this Exchange Offer will be determined on the basis of the proration mechanics described in “—Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of Ecolab Common Stock.”

 

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General Instructions

Do not send letters of transmittal and certificates representing Ecolab common stock to Ecolab, Apergy, ChampionX or the information agent. Letters of transmittal for Ecolab common stock and certificates representing Ecolab common stock should be sent to the Exchange Offer agent at an address listed on the letter of transmittal. Trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity who sign a letter of transmittal or any certificates or stock powers must indicate the capacity in which they are signing and must submit evidence of their power to act in that capacity unless waived by Ecolab.

Whether you tender your Ecolab common stock by delivery of certificates or through your broker, the Exchange Offer agent must receive the letter of transmittal for Ecolab common stock and the certificates representing your Ecolab common stock, if applicable, at the address set forth on the back cover of this prospectus prior to the expiration of this Exchange Offer. Alternatively, in case of a book-entry transfer of Ecolab common stock through The Depository Trust Company, the Exchange Offer agent must receive the agent’s message and a book-entry confirmation prior to the expiration of this Exchange Offer.

Letters of transmittal for Ecolab common stock and certificates representing Ecolab common stock must be received by the Exchange Offer agent. Please read carefully the instructions to the letter of transmittal you have been sent. You should contact the information agent if you have any questions regarding tendering your Ecolab common stock.

Signature Guarantees

Signatures on all letters of transmittal for Ecolab common stock must be guaranteed by a firm that is a member of the Securities Transfer Agents Medallion Program, or by any other “eligible guarantor institution,” as such term is defined in Rule 17Ad-15 under the Exchange Act (we refer to each of the foregoing as a U.S. eligible institution), except in cases in which shares of Ecolab common stock are tendered either (1) by a registered stockholder who has not completed the box entitled “Special Transfer Instructions” on the letter of transmittal or (2) for the account of a U.S. eligible institution.

If the certificates representing shares of Ecolab common stock are registered in the name of a person other than the person who signs the letter of transmittal, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates, with the signature(s) on the certificates or stock powers guaranteed by a U.S. eligible institution.

Guaranteed Delivery Procedures

If you wish to tender shares of Ecolab common stock pursuant to this Exchange Offer but (i) your certificates are not immediately available, (ii) you cannot deliver the shares or other required documents to the Exchange Offer agent before the expiration of this Exchange Offer or (iii) you cannot comply with the procedures for book-entry transfer through The Depository Trust Company on a timely basis, you may still tender your Ecolab common stock, so long as all of the following conditions are satisfied:

 

   

you must make your tender by or through a U.S. eligible institution;

 

   

before the expiration of this Exchange Offer, the Exchange Offer agent must receive a properly completed and duly executed notice of guaranteed delivery, substantially in the form made available by Ecolab, in the manner provided below; and

 

   

no later than 5:00 pm, Eastern time, on the second NYSE trading day after the last trading day of this Exchange Offer, the Exchange Offer agent must receive: (a)(i) share certificates representing all validly tendered shares of Ecolab common stock (other than DRS shares), in proper form for transfer or (ii) in the case of shares delivered by book-entry transfer through The Depository Trust Company, confirmation of a book-entry transfer of those shares of Ecolab common stock in the Exchange Offer agent’s account at The Depository Trust Company, (b) the letter of transmittal for shares of Ecolab

 

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common stock, properly completed and duly executed (which eligible holders of DRS shares may complete through the Exchange Offer agent’s election website) with any required signature guarantees, or, in the case of a book-entry transfer through The Depository Trust Company, an agent’s message and (c) any other required documents.

Registered stockholders (including any participant in The Depository Trust Company whose name appears on a security position listing of The Depository Trust Company as the owner of Ecolab common stock) may transmit the notice of guaranteed delivery by e-mail transmission or mail it to the Exchange Offer agent. If you hold Ecolab common stock through a bank, broker or other nominee, that institution must submit any notice of guaranteed delivery on your behalf.

Effect of Tenders

A tender of shares of Ecolab common stock pursuant to any of the procedures described above will constitute your acceptance of the terms and conditions of this Exchange Offer as well as your representation and warranty to Ecolab that (1) you have the full power and authority to tender, sell, assign and transfer the tendered shares (and any and all other shares of Ecolab common stock or other securities issued or issuable in respect of such shares), (2) when the same are accepted for exchange, Ecolab will acquire good and unencumbered title to such shares, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims, and (3) you have a “net long position” in Ecolab common stock or equivalent securities at least equal to the shares of Ecolab common stock being tendered, within the meaning of Rule 14e-4 under the Exchange Act, and such tender of shares complies with Rule 14e-4 under the Exchange Act.

It is a violation of Rule 14e-4 under the Exchange Act for a person, directly or indirectly, to tender shares of Ecolab common stock for such person’s own account unless, at the time of tender, the person so tendering (1) has a net long position equal to or greater than the amount of (a) shares of Ecolab common stock tendered or (b) other securities immediately convertible into or exchangeable or exercisable for the shares of Ecolab common stock tendered and such person will acquire such shares for tender by conversion, exchange or exercise and (2) will cause such shares to be delivered in accordance with the terms of this prospectus. Rule 14e-4 provides a similar restriction applicable to the tender or guarantee of a tender on behalf of another person.

The exchange of Ecolab common stock validly tendered and accepted for exchange pursuant to this Exchange Offer will be made only after timely receipt by the Exchange Offer agent of (a) (i) certificates representing all physically tendered shares of Ecolab common stock or (ii) in the case of shares delivered by book-entry transfer through The Depository Trust Company, confirmation of a book-entry transfer of those shares of Ecolab common stock in the Exchange Offer agent’s account at The Depository Trust Company, (b) the letter of transmittal for shares of Ecolab common stock, properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer through The Depository Trust Company, an agent’s message and (c) any other required documents.

Appointment of Attorneys-in-Fact and Proxies

By executing a letter of transmittal as set forth above, you irrevocably appoint Ecolab’s designees as your attorneys-in-fact and proxies, each with full power of substitution, to the full extent of your rights with respect to your shares of Ecolab common stock tendered and accepted for exchange by Ecolab and with respect to any and all other Ecolab common stock and other securities issued or issuable in respect of the Ecolab common stock on or after the expiration of this Exchange Offer. That appointment is effective when and only to the extent that Ecolab deposits the shares of ChampionX common stock for the shares of Ecolab common stock that you have tendered with the Exchange Offer agent. All such proxies will be considered coupled with an interest in the tendered shares of Ecolab common stock and therefore will not be revocable. Upon the effectiveness of such appointment, all prior proxies that you have given will be revoked and you may not give any subsequent proxies (and, if given, they will not be deemed effective). Ecolab’s designees will, with respect to the shares of Ecolab common stock for which the appointment is effective, be empowered, among other things, to exercise all of your voting and other rights as they, in their sole discretion, deem proper. Ecolab reserves the right to require that, in

 

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order for shares of Ecolab common stock to be deemed validly tendered, immediately upon Ecolab’s acceptance for exchange of those shares of Ecolab common stock, Ecolab must be able to exercise full voting rights with respect to such shares.

Determination of Validity

Ecolab will determine questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of Ecolab common stock, in Ecolab’s sole discretion, and its determination will be final and binding. Ecolab reserves the absolute right to reject any and all tenders of Ecolab common stock that it determines are not in proper form or the acceptance of or exchange for which may, in the opinion of its counsel, be unlawful. In the event a stockholder disagrees with such determination, he or she may seek to challenge such determination in a court of competent jurisdiction. Ecolab also reserves the absolute right to waive any of the conditions of this Exchange Offer, or any defect or irregularity in the tender of any shares of Ecolab common stock. No tender of shares of Ecolab common stock is valid until all defects and irregularities in tenders of shares of Ecolab common stock have been cured or waived. Neither Ecolab nor the Exchange Offer agent, the information agent or any other person is under any duty to give notification of any defects or irregularities in the tender of any shares of Ecolab common stock or will incur any liability for failure to give any such notification. Ecolab’s interpretation of the terms and conditions of this Exchange Offer (including the letter of transmittal and instructions thereto) will be final and binding. Notwithstanding the foregoing, Ecolab stockholders may challenge any such determination in a court of competent jurisdiction.

Binding Agreement

The tender of Ecolab common stock pursuant to any of the procedures described above, together with Ecolab’s acceptance for exchange of such shares pursuant to the procedures described above, will constitute a binding agreement between Ecolab and you upon the terms of, and subject to the conditions to, this Exchange Offer.

The method of delivery of share certificates of Ecolab common stock and all other required documents, including delivery through The Depository Trust Company, is at your option and risk, and the delivery will be deemed made only when actually received by the Exchange Offer agent. If delivery is by mail, it is recommended that you use registered mail with return receipt requested, properly insured. In all cases, you should allow sufficient time to ensure timely delivery.

Partial Tenders

If you tender fewer than all the shares of Ecolab common stock evidenced by any share certificate you deliver to the Exchange Offer agent, then you will need to fill in the number of shares that you are tendering in the table on the second page of the letter of transmittal. In those cases, as soon as practicable after the expiration of this Exchange Offer, the Exchange Offer agent will credit the remainder of the shares of common stock that were evidenced by the certificate(s) but not tendered to a DRS account in the name of the registered holder maintained by Ecolab’s transfer agent. Unless you indicate otherwise in your letter of transmittal, all of the shares of Ecolab common stock represented by share certificates you deliver to the Exchange Offer agent will be deemed to have been validly tendered. No share certificates are expected to be delivered to you, including in respect of any shares delivered to the Exchange Offer agent that were previously in certificated form, except for share certificates representing shares not accepted for exchange in this Exchange Offer.

Treatment of Shares of Ecolab Common Stock Held Under an Ecolab Savings Plan or the Ecolab Stock Purchase Plan

Shares of Ecolab common stock (or units in respect of shares of Ecolab common stock) held for the account of participants in the Ecolab Savings Plans and the Ecolab Stock Purchase Plan are eligible for participation in this Exchange Offer. An Ecolab Savings Plan or Ecolab Stock Purchase Plan participant may direct that all, some or

 

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none of the shares of Ecolab common stock (or units in respect of shares of Ecolab common stock) allocated to his or her account be exchanged, subject to the rules applicable to the Ecolab Savings Plans and the Ecolab Stock Purchase Plan for participating in this Exchange Offer.

The rules applicable to the Ecolab Savings Plans and the Ecolab Stock Purchase Plan may be different than those described in this prospectus. Holders who are tendering shares of Ecolab common stock (or units in respect of shares of Ecolab common stock) allocated to their Ecolab Savings Plan or Ecolab Stock Purchase Plan accounts should refer to the special instructions provided to them by or on behalf of their applicable plan administrator for information that is specific to the Ecolab Savings Plans and the Ecolab Stock Purchase Plan. Ecolab Savings Plan and Ecolab Stock Purchase Plan participants should consult the special instructions together with this prospectus in deciding whether or not to participate in this Exchange Offer with respect to their Ecolab Savings Plan and Ecolab Stock Purchase Plan shares of Ecolab common stock (or units in respect of shares of Ecolab common stock).

Lost, Stolen or Destroyed Certificates

If your certificate(s) representing shares of Ecolab common stock have been mutilated, destroyed, lost or stolen and you wish to tender your shares, you may request assistance with the replacement of the certificate(s) by calling Computershare at 800-322-8325. You may also need to complete an affidavit of lost, stolen or destroyed certificate(s) (that you may request by calling Computershare at 800-322-8325), post a surety bond for your lost, stolen or destroyed shares of Ecolab common stock and pay a service fee. Upon completion of the requirements for replacement of your certificate(s) and upon receipt of the completed applicable letter of transmittal your shares of Ecolab common stock will be considered tendered in this Exchange Offer.

Withdrawal Rights

Shares of Ecolab common stock validly tendered pursuant to this Exchange Offer may be withdrawn at any time before the expiration of this Exchange Offer and unless Ecolab has previously accepted such shares for exchange pursuant to this Exchange Offer, may also be withdrawn at any time after the expiration of 40 business days from the commencement of this Exchange Offer. Once Ecolab accepts Ecolab common stock for exchange pursuant to this Exchange Offer, your tender is irrevocable.

For a withdrawal of shares of Ecolab common stock to be effective, the Exchange Offer agent must receive from you a written notice of withdrawal, in the form made available to you, at one of its addresses or the e-mail address set forth on the back cover of this prospectus, and your notice must include your name and the number of shares of Ecolab common stock to be withdrawn, as well as the name of the registered holder, if it is different from that of the person who tendered those shares.

If certificates have been delivered or otherwise identified to the Exchange Offer agent, the name of the registered holder and the certificate numbers of the particular certificates evidencing the shares of Ecolab common stock must also be furnished to the Exchange Offer agent, as stated above, prior to the physical release of the certificates. If shares of Ecolab common stock have been tendered pursuant to the procedures for book-entry tender discussed in “—Procedures for Tendering,” any notice of withdrawal must specify the name and number of the account at The Depository Trust Company to be credited with the withdrawn shares and must otherwise comply with the procedures of The Depository Trust Company.

Ecolab will decide all questions as to the form and validity (including time of receipt) of any notice of withdrawal, in its sole discretion, and its decision will be final and binding, subject to the rights of the tendering stockholders to challenge Ecolab’s determination in a court of competent jurisdiction. Neither Ecolab nor the Exchange Offer agent, the information agent nor any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or will incur any liability for failure to give any notification.

Any shares of Ecolab common stock properly withdrawn will be deemed not to have been validly tendered for purposes of this Exchange Offer. However, you may re-tender withdrawn shares of Ecolab common stock by

 

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following one of the procedures discussed in “—Procedures for Tendering” at any time prior to the expiration of this Exchange Offer (or pursuant to the instructions sent to you separately).

If you hold shares of Ecolab common stock through the Ecolab Savings Plans or Ecolab Stock Purchase Plan (or units in respect of shares of Ecolab common stock), you will be provided with special instructions by or on behalf of your plan administrator on how to withdraw your shares (or units in respect of shares) and you must deliver any required information in a timely manner in order for the tabulator for the Ecolab Savings Plans or agent for the Ecolab Stock Purchase Plan to withdraw your election to exchange from the final tabulation. The deadline will be specified in the special instructions provided to you (or, if this Exchange Offer is extended, any new plan participant withdrawal deadline established by the applicable plan administrator).

Except for the withdrawal rights described above, any tender made under this Exchange Offer is irrevocable.

Book-Entry Accounts

Certificates representing shares of ChampionX common stock will not be issued to tendering holders of shares of Ecolab common stock pursuant to this Exchange Offer. Rather than issuing certificates representing such shares of ChampionX common stock to tendering holders of shares of Ecolab common stock, the Exchange Offer agent will cause the shares of ChampionX common stock to be credited to book-entry account records maintained by the Exchange Offer agent for the benefit of the respective tendering holders. Following the consummation of this Exchange Offer, Merger Sub will be merged with and into ChampionX in the Merger and each share of ChampionX common stock will be converted into the right to receive Apergy common stock and cash in lieu of fractional shares of Apergy common stock. As promptly as practicable following the Merger and Ecolab’s determination and the notice of the final proration factor, if any, the Exchange Offer agent will credit the shares of Apergy common stock into which the shares of ChampionX common stock have been converted to book-entry accounts maintained for the benefit of the Ecolab stockholders who received shares of ChampionX common stock in this Exchange Offer or the clean-up spin-off (in the event this Exchange Offer is not fully subscribed) or the distribution (in the event this Exchange Offer is terminated by Ecolab without the exchange of shares) and will send these holders a statement evidencing their holdings of shares of Apergy common stock.

Extension; Termination; Amendment

Extension, Termination or Amendment by Ecolab

Subject to its compliance with the Merger Agreement, Ecolab expressly reserves the right, in its sole discretion, at any time and from time to time to extend the period of time during which this Exchange Offer is open and thereby delay acceptance for exchange of, and the exchange of, any shares of Ecolab common stock validly tendered and not properly withdrawn in this Exchange Offer. For example, this Exchange Offer can be extended if any of the conditions to consummation of this Exchange Offer described in the next section entitled “—Conditions to Consummation of This Exchange Offer” are not satisfied or waived prior to the expiration of this Exchange Offer.

Subject to its compliance with the Merger Agreement, Ecolab expressly reserves the right, in its sole discretion, to amend the terms of this Exchange Offer in any respect prior to the expiration of this Exchange Offer, except that Ecolab does not intend to extend this Exchange Offer other than in the circumstances described above.

If Ecolab materially changes the terms of or information concerning this Exchange Offer or if Ecolab waives a material condition of this Exchange Offer, it will extend this Exchange Offer if required by law. The SEC has stated that, as a general rule, it believes that an offer should remain open for a minimum of five business days from the date that notice of the material change is first given or in the event there is a waiver of a material condition to this Exchange Offer. The length of time will depend on the particular facts and circumstances.

 

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As required by law, this Exchange Offer will be extended so that it remains open for a minimum of ten business days following the announcement if:

 

   

Ecolab changes the method for calculating the number of shares of ChampionX common stock offered in exchange for each share of Ecolab common stock; and

 

   

this Exchange Offer is scheduled to expire within ten business days of announcing any such change.

If Ecolab extends this Exchange Offer, is delayed in accepting for exchange any shares of Ecolab common stock or is unable to accept for exchange any shares of Ecolab common stock under this Exchange Offer for any reason, then, without affecting Ecolab’s rights under this Exchange Offer, the Exchange Offer agent may retain all shares of Ecolab common stock tendered on Ecolab’s behalf. These shares of Ecolab common stock may not be withdrawn except as provided in “—Withdrawal Rights.”

Ecolab’s reservation of the right to delay acceptance for exchange of any shares of Ecolab common stock is subject to applicable law, which requires that Ecolab pay the consideration offered or return the shares of Ecolab common stock deposited promptly after the termination or withdrawal of this Exchange Offer.

Any such extension, termination or amendment will be followed as promptly as practicable by public announcement thereof by Ecolab, which, in the case of an extension, will be made no later than 9:00 a.m., New York City time, on the next business day after the previously-scheduled expiration date.

Method of Public Announcement

Subject to applicable law (including Rules 13e-4(d), 13e-4(e)(3) and 14e-1 under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with this Exchange Offer be promptly disclosed to stockholders in a manner reasonably designed to inform them of the change) and without limiting the manner in which Ecolab may choose to make any public announcement, Ecolab assumes no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to Business Wire.

Conditions to Consummation of This Exchange Offer

Ecolab will not be required to complete and consummate this Exchange Offer and may extend or terminate this Exchange Offer, if, at the scheduled expiration of this Exchange Offer:

 

   

the registration statement on Forms S-4 and S-1 of ChampionX has not become effective under the Securities Act or any stop order suspending the effectiveness of such registration statement has been issued and is in effect;

 

   

the shares of Apergy common stock to be issued in the Merger have not been authorized for listing on the NYSE;

 

   

each of the conditions to the obligation of the parties to the Merger Agreement to consummate the Merger (other than this Exchange Offer) and effect the other transactions contemplated by the Merger Agreement have not been satisfied or waived (other than those conditions that by their nature are to be satisfied contemporaneously with the Distribution and/or the Merger);

 

   

the Merger Agreement or the Separation Agreement has been terminated;

 

   

Ecolab has not received the Distribution Tax Opinion, the Merger Tax Opinion or the KPMG Tax Opinion; or

 

   

any of the following conditions or events have occurred, or Ecolab reasonably expects any of the following conditions or events to occur:

 

   

any action, litigation, suit, claim or proceeding is instituted that would be reasonably likely to enjoin, prohibit, restrain, make illegal, make materially more costly or materially delay the consummation of this Exchange Offer;

 

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any injunction, order, stay, judgment or decree is issued by any court, government, governmental authority or other regulatory or administrative authority having jurisdiction over Ecolab, ChampionX or Apergy and is in effect, or any law, statute, rule, regulation, legislation, interpretation, governmental order or injunction is enacted or enforced, any of which would reasonably be likely to restrain, prohibit or delay consummation of this Exchange Offer;

 

   

any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States;

 

   

any extraordinary or material adverse change in U.S. financial markets generally, including, without limitation, a decline of at least 15% in either the Dow Jones Industrial Average or the S&P 500 within a period of 60 consecutive days or less occurring after April 30, 2020;

 

   

a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States;

 

   

a commencement of a war (whether declared or undeclared), armed hostilities or other national or international calamity or act of terrorism, directly or indirectly involving the United States, which would reasonably be expected to affect materially and adversely, or to delay materially, the consummation of this Exchange Offer;

 

   

if any of the situations above exist as of the commencement of this Exchange Offer, any material deterioration of the situation; or

 

   

a “market disruption event” (as defined below) occurs with respect to shares of Ecolab common stock or Apergy common stock on any of the Valuation Dates and such market disruption event has, in Ecolab’s reasonable judgment, impaired the benefits of this Exchange Offer to Ecolab.

Each of the foregoing conditions to the consummation of this Exchange Offer is independent of any other condition; the exclusion of any event from a particular condition above does not mean that such event may not be included in another condition.

If any of the above conditions or events occurs, Ecolab may:

 

   

terminate this Exchange Offer and promptly return all tendered shares of Ecolab common stock to tendering stockholders;

 

   

extend this Exchange Offer and, subject to the withdrawal rights described in “—Withdrawal Rights,” retain all tendered shares of Ecolab common stock until this Exchange Offer, as so extended, expires;

 

   

amend the terms of this Exchange Offer; or

 

   

waive or amend any unsatisfied condition and, subject to any requirement to extend the period of time during which this Exchange Offer is open, complete this Exchange Offer.

These conditions are for the sole benefit of Ecolab. Ecolab may assert these conditions with respect to all or any portion of this Exchange Offer regardless of the circumstances giving rise to them (except any action or inaction by Ecolab). Ecolab expressly reserves the right, in its sole discretion, to waive any condition in whole or in part at any time prior to the expiration of this Exchange Offer. Ecolab’s failure to exercise its rights under any of the above conditions does not represent a waiver of these rights (provided that the right has not otherwise become exercisable). Each right is an ongoing right which may be asserted at any time prior to the expiration of this Exchange Offer. All conditions to consummation of this Exchange Offer must be satisfied or waived by Ecolab prior to the expiration of this Exchange Offer.

A “market disruption event” with respect to either Ecolab common stock or Apergy common stock means a suspension, absence or material limitation of trading of Ecolab common stock or Apergy common stock on the NYSE for more than two hours of trading during the principal trading session on the NYSE or a breakdown or failure in the price and trade reporting systems of the NYSE as a result of which the reported trading prices for Ecolab common stock or Apergy common stock on the NYSE during any half-hour trading period during the

 

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principal trading session in the NYSE are materially inaccurate, as determined by Ecolab or the Exchange Offer agent in its sole discretion, on the day with respect to which such determination is being made. For purposes of such determination, a limitation on the hours or number of days of trading will not constitute a market disruption event if it results from an announced change in the regular business hours of the NYSE.

Fees and Expenses

Ecolab has retained Georgeson to act as the information agent and Computershare to act as the Exchange Offer agent in connection with this Exchange Offer. The information agent may contact holders of Ecolab common stock by mail, e-mail, telephone, facsimile transmission and personal interviews and may request bank, broker and other nominee stockholders to forward materials relating to this Exchange Offer to beneficial owners of Ecolab common stock. The information agent and the Exchange Offer agent each will receive reasonable compensation for its respective services, will be reimbursed for reasonable out-of-pocket expenses and will be indemnified against specified liabilities in connection with their services, including liabilities under the federal securities laws.

Neither the information agent nor the Exchange Offer agent has been retained to make solicitations or recommendations with respect to this Exchange Offer. The fees they receive will not be based on the number of shares of Ecolab common stock tendered in this Exchange Offer.

Ecolab will not pay any fees or commissions to any bank, broker or other nominee or any other person for soliciting tenders of Ecolab common stock in this Exchange Offer. Ecolab will, upon request, reimburse bank, broker or other nominees for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers.

No bank, broker or other nominee will be deemed to be Ecolab’s agent or the agent of ChampionX, the information agent or the Exchange Offer agent for purposes of this Exchange Offer.

Legal Limitations

This prospectus is not an offer to buy, sell or exchange and it is not a solicitation of an offer to buy or sell any shares of ChampionX common stock, shares of Ecolab common stock or shares of Apergy common stock in any jurisdiction in which the offer, sale or exchange is not permitted. After the consummation of this Exchange Offer and prior to the Merger, it will not be possible to trade the ChampionX common stock.

Certain Matters Relating to Non-U.S. Jurisdictions

Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. None of Ecolab, Apergy or ChampionX has taken any action under non-U.S. regulations to facilitate a public offer to exchange the shares of Ecolab common stock, Apergy common stock or ChampionX common stock outside the United States. Accordingly, the ability of any non-U.S. person to tender shares of Ecolab common stock in this Exchange Offer will depend on whether there is an exemption available under the laws of such person’s home country that would permit the person to participate in this Exchange Offer without the need for Ecolab, Apergy or ChampionX to take any action to facilitate a public offering in that country or otherwise. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors.

Non-U.S. stockholders should consult their advisors in considering whether they may participate in this Exchange Offer in accordance with the laws of their home countries and, if they participate, whether there are any restrictions or limitations on transactions in the shares of Ecolab common stock, Apergy common stock or ChampionX common stock that may apply in their home countries. None of Ecolab, Apergy or ChampionX can provide any assurance about whether such limitations may exist.

 

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Distribution of ChampionX Common Stock Remaining After This Exchange Offer

All shares of ChampionX common stock owned by Ecolab that are not exchanged in this Exchange Offer will be distributed in the clean-up spin-off to holders of Ecolab common stock whose shares of Ecolab common stock remain outstanding after the consummation of this Exchange Offer. The record date for the clean-up spin-off, if any, will be announced by Ecolab. Any Ecolab stockholder who validly tenders (and does not properly withdraw) shares of Ecolab common stock accepted for exchange in this Exchange Offer will with respect to such shares waive their rights to receive, and forfeit any rights to, shares of ChampionX common stock distributed in the clean-up spin-off.

Upon consummation of this Exchange Offer, Ecolab will deliver to the Exchange Offer agent a book-entry authorization representing (a) all of the shares of ChampionX common stock being exchanged in this Exchange Offer, with instructions to hold the shares of ChampionX common stock as agent for the holders of shares of Ecolab common stock validly tendered and not properly withdrawn in this Exchange Offer whose shares are accepted in this Exchange Offer and (b) in the case of a clean-up spin-off, if any, the remaining shares of ChampionX common stock to Ecolab stockholders whose shares of Ecolab common stock remain outstanding after the consummation of this Exchange Offer. Shares of Apergy common stock will be delivered following the effectiveness of the Merger, pursuant to the procedures determined by the Exchange Offer agent. See “Exchange Offer—Terms of This Exchange Offer—Exchange of Shares of Ecolab Common Stock.”

If this Exchange Offer is terminated by Ecolab without the exchange of shares, but the conditions to consummation of the Transactions have otherwise been satisfied, Ecolab intends to distribute all shares of ChampionX common stock owned by Ecolab on a pro rata basis to holders of Ecolab common stock, with a record date to be announced by Ecolab.

 

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INFORMATION ABOUT APERGY AND MERGER SUB

Information about Apergy

Overview—Apergy

Apergy is a leading provider of highly engineered equipment and technologies that help companies drill for and produce oil and gas safely and efficiently around the world. Apergy’s products provide efficient functioning throughout the lifecycle of a well—from drilling to completion to production. Apergy reports its results of operations in two reporting segments: the Production & Automation Technologies segment and the Drilling Technologies segment. Apergy’s Production & Automation Technologies segment offerings consist of artificial lift equipment and solutions, including rod pumping systems, electric submersible pump systems, progressive cavity pumps and drive systems and plunger lifts, as well as a full automation and digital offering consisting of equipment, software and Industrial Internet of Things solutions for downhole monitoring, wellsite productivity enhancement and asset integrity management. Apergy’s assertion of being a leading provider in its field is corroborated by a January 2020 Oilfield Products Customer Satisfaction Survey conducted by EnergyPoint Research, in which Apergy Artificial Lift was rated as the top overall products supplier out of over 50 competitors. In 2019, Apergy was also ranked first in a key measure of customer loyalty in the artificial lift industry in a worldwide survey by Kimberlite Oilfield Research. The survey also found that Apergy is the only major artificial lift company that had improved in virtually all of the performance categories measured. This was the fourth consecutive year Apergy earned the highest Net Promoter Score among the major integrated artificial lift suppliers. According to Kimberlite, “The Net Promoter Score is a widely-used industry benchmark and is based on the question ‘How likely would you be to recommend this company to a friend or colleague’ using a scale of 0 to 10 with 10 being highly likely. The Net Promoter Score is calculated by subtracting the percentage of Promoters (ratings of 9 or 10) minus the percentage of Detractors (ratings of 6 or lower). Net Promoters are customers that exhibit strong customer loyalty and are more inclined to forgive a supplier for making a mistake and is more willing to try new offerings from the supplier. Net Detractors are much less willing to repurchase from a supplier and often serves as a detriment to the supplier by sharing their disappointment in the supplier’s performance with others in the industry. Consequently, the Net Promoter Score is a good benchmark to track and monitor over time and correlate to business performance.” Apergy’s Net Promoter Score was 43% in 2019, compared to its next closest competitor whose Net Promoter Score was 15%. Apergy’s Net Promoter Score was 44% in 2018, 38% in 2017 and 48% in 2016, while Apergy’s next closest competitor’s Net Promoter Score was 28%, 20% and 37% in those years, respectively. Apergy management believes that this result means that customers highly value Apergy’s products and services relative to Apergy’s competitors, and that Apergy is viewed favorably in its industry marketplace.

Apergy’s Drilling Technologies segment offering provides market leading polycrystalline diamond cutters and bearings that result in cost effective and efficient drilling. Apergy’s assertion that its polycrystalline diamond cutter business is “market leading” is extrapolated from information contained in the annual Spears & Associates Oilfield Market Report released in April 2020. Apergy management collects the drill bit revenues of its customers from the report, then estimates the percentage of each customer’s revenue represented by Apergy’s polycrystalline diamond cutters based on management estimates. Apergy management then compiles this information with publicly available financial information of its competitors to estimate the size of the market for diamond cutters and, together with the customer information collected from the Spears & Associates Oilfield Market Reports, extrapolates the percentage of the market represented by Apergy’s polycrystalline diamond cutters. Each year, this analysis has shown Apergy to be in the top position with the highest market share, with at least 10% greater share than its next closest competitor.

Apergy’s products are used by a broad spectrum of customers in the global oil and gas industry, including national oil and gas companies, large integrated and independent oil and gas companies, major oilfield equipment and services providers, and pipeline companies. Apergy competes across major oil and gas markets globally, with a particular strength in the North American onshore market. Apergy’s products are particularly well suited for unconventional/shale oil and gas markets.

 

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The quality, innovative technology and performance of Apergy’s technologies drive improved cost-effectiveness, productivity, efficiency, reliability and safety for Apergy’s customers. Apergy believes its strong position in its core markets and its long-term customer relationships are due to its focus on technological advancement, product reliability and commitment to superior customer service across its organization. Apergy’s long-term customer relationships and the consumable nature of many of its products also enable it to benefit from recurring revenue throughout the lifecycle of a producing well. Apergy believes it is also differentiated from competitors through its proven business model focused on high customer intimacy, innovative technology and application engineering. Apergy has a long history of innovation across its businesses, and its heritage in the oilfield equipment industry extends over 60 years. During this time, Apergy has expanded through a series of strategic acquisitions of well-known businesses and brands as well as internal growth initiatives. Key acquisitions that built the artificial lift platform include Harbison-Fischer, Wellmark, PCS Ferguson (f/k/a Production Controls Services, Inc.) and Oil Lift Technology. Apergy’s leading polycrystalline diamond cutter business was created through the acquisition of US Synthetic. Through its acquisitions, Apergy has developed experience as an effective operator and successful integrator of businesses.

Following the closing of the Transactions, Apergy plans to change the name of the combined company to ChampionX Corporation. Apergy also plans to change its ticker symbol to “CHX.”

For a more detailed description of the business of Apergy, see Apergy’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2019.

Directors and Officers of Apergy Before and After the Merger

Directors

After the Merger, the Apergy Board of Directors will consist of nine directors: the seven current directors on the Apergy Board of Directors and two directors designated by Ecolab. One of the Ecolab board designees shall be appointed as a Class I director of Apergy, and the second of the Ecolab board designees shall be appointed as a Class II director of Apergy. Each of the directors designated by Ecolab must qualify as an independent director, as such term is defined in NYSE Rule 303A.02.

The biographies of the following directors of Apergy before the Merger are incorporated by reference to Apergy’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2019: Daniel W. Rabun, Mamatha Chamarthi, Kenneth M. Fisher, Gary P. Luquette, Stephen M. Todd, Stephen K. Wagner and Sivasankaran “Soma” Somasundaram.

Executive Officers

After the Merger, Apergy’s current President and Chief Executive Officer, Sivasankaran “Soma” Somasundaram, and current Senior Vice President and Chief Financial Officer, Jay A. Nutt, will continue in their roles. Deric Bryant, current Executive Vice President & President of Ecolab’s Upstream Energy business, is expected to serve as Chief Operating Officer. Certain members of the ChampionX management team are expected to join the Apergy management team as well.

The descriptions of Messrs. Somasundaram and Nutt, President and Chief Executive Officer and Chief Financial Officer, respectively, of Apergy before the Merger are incorporated by reference to Apergy’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2019.

Information About Merger Sub

Merger Sub is a direct, wholly owned subsidiary of Apergy. Merger Sub was incorporated in the State of Delaware on December 16, 2019 for the purposes of merging with and into ChampionX in the Merger. Merger Sub has not carried on any activities other than in connection with the Merger Agreement.

 

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INFORMATION ABOUT ECOLAB

Ecolab is a Delaware corporation incorporated in 1924. With 2019 sales of $14.9 billion, Ecolab is the global leader in water, hygiene and energy technologies and services that protect people and vital resources. Ecolab delivers comprehensive programs, products and services to promote safe food, maintain clean environments, optimize water and energy use, and improve operational efficiencies for customers in the food, healthcare, energy, hospitality and industrial markets in more than 170 countries around the world. Ecolab’s cleaning and sanitizing programs and products, and pest elimination services, support customers in the foodservice, food and beverage processing, hospitality, healthcare, government and education, retail, textile care and commercial facilities management sectors. Ecolab’s products and technologies are also used in water treatment, pollution control, energy conservation, oil production and refining, steelmaking, papermaking, mining and other industrial processes.

For a more detailed description of the business of Ecolab, see Ecolab’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2019.

 

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INFORMATION ABOUT THE CHAMPIONX BUSINESS

Company Overview

ChampionX is a leading provider of on-site, technology-driven chemistry programs and value-enabling solutions and services to the global upstream oil and natural gas industry. ChampionX’s technologies enable customers to safely manage the critical challenges they face throughout the lifecycle of their assets, helping minimize risk, deliver production targets, defer capital investments and maximize profitability. ChampionX provides applications and technology for drilling, production and midstream, both onshore and offshore. ChampionX’s customers include many of the largest publicly traded E&P and service companies, as well as national and independent oil and natural gas companies of all sizes. ChampionX’s assertion of being a leader in its field is corroborated by an August 2019 report by Kimberlite International Oilfield Research on supplier selection, market share, performance and competitive positioning in the oil and natural gas production industry.

ChampionX earns revenue across the lifecycle of wells, which are drilled and completed in days or months, and then produce for years. More than 80% of ChampionX’s revenue is generated during the long producing life of the well, which is the most stable and least capital-intensive phase of the lifecycle, improving consistency of revenue and cash flow generation.

 

 

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With 2019 net sales of $2.3 billion, ChampionX’s product and service portfolio is deployed under a range of conditions in more than 55 countries that include the most technically and geographically demanding environments. ChampionX’s comprehensive offering addresses the many critical processes and challenges in the oil and natural gas lifecycle, including corrosion, oil and water separation, paraffin and asphaltene control, scale deposits, hydrogen sulfide impurities, drilling and well stimulation, hydrate control, foaming control, flow restrictions and water treatment needs. ChampionX also has leading worldwide capabilities and footprint, with nearly 30 manufacturing locations, four technology centers and a comprehensive, reliable supply chain that enables ChampionX to effectively and securely deliver its offering on a global basis.

ChampionX also delivers innovative digital tools that supplement its service and chemical applications, enabling employees and customers to collaborate in real time regardless of location. ChampionX captures and processes technical data from the field to generate insights, predictions and recommendations to react proactively to challenges arising in customer field operations. These tools increasingly enable ChampionX to connect the industry’s leading technical experts with field personnel to leverage its expertise in real-time across the world.

 

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History and Development

ChampionX brings the respected legacies and strengths of both Nalco and Champion in the Upstream segment. ChampionX has a history of success and innovation stretching back almost a century to its origins as a part of National Aluminate Corporation, which commenced sales of drilling additives in 1929 in addition to its other water treatment businesses. ChampionX’s 1995 joint venture with Exxon Chemical Company was a significant milestone that enhanced and strengthened its technology, safety and change management culture while further developing its capability to create value for large, integrated oil and natural gas companies. ChampionX became part of Ecolab with Ecolab’s acquisition of Nalco Holding Company in 2011. ChampionX’s business continued and grew as part of Ecolab’s Nalco Champion business unit following Ecolab’s 2013 purchase and integration of Champion Technologies, a global specialty chemical company serving the oil and natural gas industry.

 

 

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Industry and Market Conditions

ChampionX offers products and services principally to customers in the upstream oil and natural gas industry, which involves the exploration for, and production of, oil and natural gas. According to industry market studies, ChampionX expects the demand for oil and natural gas energy to grow over 20% and 40% respectively between now and 2050, fueled by a growing world population and expanding global middle class. Along with this increased demand, ChampionX expects a greater emphasis on responsible and sustainable production that creates new opportunities and challenges for its business and customers. Furthermore, given the natural decline rates of oil and natural gas production from existing reserves, ChampionX expects the long-term increase in demand to result in a continued need to discover and access new oil and natural gas reserves that can be efficiently, responsibly and cost-effectively developed. ChampionX believes that its business, with the strong value proposition of its products and services, is well positioned to create value for oil and natural gas producers that are increasingly focused on long-term financial health.

ChampionX expects that the development of new oil and natural gas reserves will pose increasingly difficult technical challenges to E&P companies as new production shifts towards harder-to-reach and harder-to-develop oil and natural gas reserves such as ultra-deepwater, oil sands and unconventional shale. This shift has been driven by the increasing depletion of easier-to-produce conventional oil and natural gas reserves and advances in production methods and technologies that make unconventional reserves more economically attractive.

 

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LOGO

Production of harder-to-reach oil, such as oil from ultra-deepwater, subsea developments, oil sands and other unconventional reserves, make drilling and the application of effective chemistry materially more difficult. This type of production is projected to increase from 25% to 31% of total worldwide oil production from 2019 to 2025, according to industry market studies. Total worldwide oil production is expected to climb from 83.5 million to 86.7 million barrels per day during the same period. Advances in deepwater and ultra-deepwater production methods have made deepwater and ultra-deepwater projects more economically attractive, benefiting many traditional deepwater markets and emerging ultra-deepwater fields. Investment in deepwater and ultra-deepwater E&P is projected to grow a total of 44% from 2019 to 2025.

Water treatment, management and processing is an integral aspect of oil and natural gas production as well as the largest portion of ChampionX’s overall portfolio of solutions. As production shifts towards harder-to-reach and harder-to-develop reserves, which present more challenging operating conditions, ChampionX expects demand for water-related services and chemistries to grow along with the need to responsibly manage increasingly important and scarce water resources. ChampionX believes that its global footprint and unique offerings of products, services and expertise put ChampionX in a strong position to support oil and natural gas production in these challenging environments and conditions. ChampionX also offers solutions that focus on reducing, reusing and recycling water through the life of a production asset in a manner that maximizes production and optimizes water usage in a responsible fashion.

The impact of COVID-19 on global energy demand as well as the oil price declines following the announcement of the expiration of the OPEC and Russia production cuts in March 2020 and the subsequent deal to cut production that was announced by OPEC and its allies in April 2020 will affect the oil and gas industry and drive budgetary changes and reforecasts for the short- and mid-term outlook. Given the volatile nature of these changes, the absolute market numbers quoted in this document may change, but the general trends and proportions are expected to remain directionally consistent as set forth above over the long term forecast period.

Business Segments

Operating activities that share similar economic characteristics, products and production processes, end-use markets, channels of distribution and regulatory environments have been organized into two reportable segments: Oilfield Performance and Specialty Performance.

Oilfield Performance

Oilfield Performance generated net sales of approximately $2 billion in 2019, representing approximately 87% of ChampionX’s total 2019 net sales. This segment is comprised of sales directly to E&P companies and is typically more stable because of its link to existing production, the lower investment required by customers, and the critical support these customers need to help solve their challenges.

 

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Nearly all of ChampionX’s sales in this segment are derived from providing E&P and other customers in the oil and natural gas production and midstream markets with solutions to manage and control corrosion, oil and water separation, flow assurance, sour gas treatment and a host of water-related issues. This wide range of capabilities helps customers to minimize risks of operational interruptions and failures, maximize production targets, extend field life and increase profitability in a safe and responsible manner.

The products and services offered by Oilfield Performance cover a broad range of chemical solutions for onshore and offshore E&P operations and are built upon ChampionX’s foundation of deep expertise and capability in applications across the oil and natural gas lifecycle. ChampionX’s largest product lines in Oilfield Performance include corrosion inhibitors, scale inhibitors, emulsion breakers and biocides.

In addition, Oilfield Performance utilizes ChampionX’s reservoir modeling capability and chemistry expertise to provide enhanced oil recovery solutions to oil producers. These solutions are intended to enable its customers to increase oil recovery in mature oilfields and improve return on investment by extending the economic life of such fields in a safe and responsible manner, both onshore and offshore.

ChampionX’s Oilfield Performance products and services are sold and supported by its on-site experts and corporate account leaders, as well as through distributors, sales agents and joint ventures. More than half of ChampionX’s employees are specialists who provide expertise and support to its Oilfield Performance customers at their production sites and remotely. About 20% of ChampionX’s global workforce consists of logistics specialists who deliver supply assurance and ensure that its Oilfield Performance customers receive its products when and as needed for their operations, whether on land or offshore, including the most remote locations. In addition, Oilfield Performance is supported by over 400 experienced research scientists, technical experts and marketing professionals who develop new products and services and help customers manage the critical challenges they face throughout the life cycle of their assets.

Oilfield Performance mostly supports existing production. As a result, Oilfield Performance sales are less sensitive than those of Specialty Performance to changes in ChampionX’s customers’ capital expenditure budgets related to the exploration for and development of new oil and natural gas reserves, which are more directly affected by trends in oil and natural gas prices.

Specialty Performance

Specialty Performance generated net sales of approximately $0.3 billion in 2019, representing approximately 13% of ChampionX’s total 2019 net sales. This segment is comprised of sales directly to service and equipment companies that support global E&P companies.

Nearly all of ChampionX’s sales in this segment are derived from specialty products that support well stimulation, construction (including drilling and cementing) and remediation needs in the oil and natural gas industry. Specialty Performance products are specifically formulated to help its customers manage the challenges involved in developing conventional and unconventional oil and natural gas reserves.

Specialty Performance offers a range of fluid solutions that help its customers achieve more successful and efficient drilling and cementing operations and enhance well productivity. ChampionX also leverages its deep experience in water treatment and processing to offer its customers products that, among other things, help to control scale, inhibit microbial growth and inhibit corrosion. Specialty Performance leverages ChampionX’s expertise to design tailored products that can help ChampionX’s customers create ideal fluid packages based on individual well dynamics. ChampionX’s largest product lines in Specialty Performance include fracturing fluid packages, drilling additives, cement additives and products that support acidizing activities.

The products offered by Specialty Performance are sold and supported by ChampionX’s corporate account leaders, marketing professionals and field sales engineers. Specialty Performance is also supported by over 50 experienced research scientists and technical experts who work directly with its customers to develop customized solutions for their operations in challenging environments and conditions.

 

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Sales of ChampionX’s Specialty Performance products are more sensitive than those of its Oilfield Performance products to changes in its customers’ capital expenditure budgets as they relate more directly to the exploration and development of new oil and natural gas reserves. This exploration and development activity is affected by trends in oil and natural gas prices and its customers’ corresponding levels of drilling activity, capital investment and well development.

ChampionX’s Competitive Strengths

ChampionX has been a leader in the upstream market backed by its innovative and differentiated technology, proprietary chemical solutions and focus on its strong customer relationships with the world’s largest and most successful oil and natural gas E&P companies. This positions ChampionX well to pursue its primary business strategies and provide a strong competitive advantage to enable its ongoing success:

Positioned to succeed in hard-to-reach oil and natural gas production environments

ChampionX offers a unique combination of industry focus, leading technologies, continued investment in R&D, water management know-how and unmatched field experience that gives ChampionX a competitive advantage in tomorrow’s most promising large-scale oil and natural gas production markets, including those involving ultra-deepwater, custom designed fracking packages, produced water handling and advanced offshore enhanced oil recovery technologies. These markets will require more innovative products and services that will enable more value-based pricing opportunity for ChampionX.

Scalable and flexible business model to win in cyclical, “lower-for-longer” market scenarios

ChampionX has built its business on driving value for its customers through differentiated technology and high-touch customer service. ChampionX believes that its tailored products and services make it integral to the success of its customers’ established operations, which ChampionX expects will enable it to deliver growth that outpaces that of the market and to maintain profitability and weather the volatility in oil and natural gas prices. ChampionX’s history demonstrates its ability to remain focused on enhancing its product portfolio, reducing process complexity and optimizing its production costs to promote success, even in extended periods of decreased oil and natural gas prices. More than 80% of its revenue is generated during the long producing life of the well, which is the most stable and least capital-intensive phase of the lifecycle, improving consistency of revenue and cash flow generation.

Comprehensive global supply chain presence and sourcing strategies

Industry market studies indicate that total global energy demand will increase by nearly 25% by 2030, which will drive the continued shift in oil and natural gas production towards harder-to-reach reserves. With ChampionX’s rich technology portfolio, research and development expertise, strong and expert service force and a long history of delivering its products securely to customers for their operations when and as needed, no matter their location, ChampionX believes it is positioned to meet the needs of its customers as they continue to expand production of harder-to-reach oil and natural gas reserves. ChampionX’s global manufacturing footprint, comprising owned and leased assets in major oil and natural gas production locations around the world, and its procurement and logistics capabilities enable it to consistently supply its customers’ needs in challenging and isolated areas.

Executive leadership team with deep industry experience

ChampionX’s senior leadership team consists of established industry professionals with significant relevant experience. ChampionX believes that they have the deep industry, operational, management and financial experience required to help ChampionX capitalize on business opportunities and effectively manage challenges that may arise.

 

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Proven industry leadership and innovations in water management

Water is critical to ChampionX’s customers’ operations. ChampionX will benefit from a long history of leadership in water treatment and processing, which it will utilize to address the water-related challenges faced by its customers, including scale, corrosion, microbial growth and reservoir souring. In addition, ChampionX has expertise in responsibly managing scarce water resources by enabling its customers to reduce their water usage, recycle the water they use and responsibly manage wastewater, whether offshore, onshore or in unconventional reserves such as oil sands relying on steam-assisted gravity drainage. ChampionX believes its unique combination of experience in water treatment and processing and oil and natural gas production puts it in a leading position to meet its customers’ water-related needs in a responsible fashion.

Investment in industry-leading digital solutions

ChampionX will continue to invest in digital innovation to better enable it to provide its customers with improved data analytics and ongoing intelligence about their operations that leverages its global knowledge base. These initiatives allow ChampionX to collaborate with its customers in optimizing the efficiency of their operations. ChampionX’s CORE system is a platform for knowledge sharing, built around global, collaborative networks. CORE enables ChampionX’s employees to collaborate in real time and to capture and process technical data and reports that it uses to provide its customers with insights from their operations that help predict and solve challenges across the assets in their organizations. ChampionX’s TEAMS center allows its on-site field employees to access technical expertise in real time to quickly identify and address technical challenges. ChampionX’s connected digital devices support services, such as remote tank-level monitoring and water management sensing, enable it to provide additional value to customers.

ChampionX’s Business Strategies

ChampionX’s strategic goals are to maintain its leadership in delivering chemical solutions to the upstream oil and natural gas industry and pursue adjacent market growth opportunities in order to deliver profitable growth, maximize free cash flow and create stockholder value. ChampionX intends to achieve these goals by executing the following strategies:

Expand addressable market

ChampionX believes that there are significant opportunities to expand into product and service offerings adjacent to its current portfolio by leveraging its deep industry experience, customer intimacy, global footprint, technical capabilities and on-site experts. ChampionX expects to pursue such expansion through a variety of means, including collaborative technology development and targeted acquisitions.

Expand share of offshore production market

The highly-advanced production methods and technologies used in deepwater production, defined as production at water depths of 125 to 1,500 meters, can now be applied to ultra-deepwater reserves, defined as production at water depths greater than 1,500 meters, making exploitation of these reserves more economically attractive than in the past. ChampionX intends to build upon its historical leadership position in the offshore market as it increasingly relies upon ultra-deepwater reserves to satisfy growing energy demand.

Capitalize on opportunities in unconventional production and associated water treatment needs

Advances in production methods and technologies have also made unconventional reserves more economically attractive. As a result of these advances and the ongoing depletion of conventional oil and natural gas reserves, E&P capital expenditures have shifted towards unconventional oil and natural gas reserves. ChampionX offers a range of products specifically formulated to help its customers manage the challenges involved in developing

 

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unconventional reserves, including ultra-deepwater, oil sands and those reserves that require horizontal drilling, and have the procurement and logistics capabilities required to securely supply its customers’ needs in challenging and isolated areas.

This shift in production has also created new opportunities for ChampionX to leverage its long-standing water treatment and processing capabilities to assist its customers in unconventional production. Water is critical to its customers’ operations, including drilling, fracturing, pressurizing, extraction and transportation, reuse and disposal, and scarcity of water resources has increased the need to responsibly manage its use.

Given the industry’s increasing focus to pursue unconventional development in a responsible fashion—often in water-scarce regions of the world—ChampionX believes its unique combination of water treatment and processing experience in the oil and natural gas E&P sector puts ChampionX in a leading position to bring value to its customers’ operations.

Increase capability in midstream markets

Recent increases in the production of oil and natural gas in the Unites States, driven by advances in production methods and technologies, including horizontal drilling, has led to significant investments in the oil and natural gas pipeline infrastructure in the United States. This pipeline infrastructure is generally owned by large service providers. ChampionX offers midstream operators a full range of technologies and additives to help protect their investments from corrosion and optimize flow-through performance. ChampionX intends to continue expanding its relationships with midstream operators to help them reduce capital expenditures and extend the life of their existing infrastructure.

Pursue opportunities in enhanced oil recovery

ChampionX’s unique technical knowledge and experience addressing the interactions between reservoir rock, injected and formation water, chemistry design and selection, and facility design allow ChampionX to deliver field-scale enhanced oil recovery technologies to its customers. These effective and economical solutions enable customers to meet the challenges of reducing their environmental impact while minimizing capital investments associated with new well development. These technologies can be applied both onshore and offshore and are developed hand-in-hand with its customers. ChampionX’s experience meeting logistics challenges and supply and quality assurance requirements at a large scale enable it to successfully deploy its enhanced oil recovery technologies across a range of conditions.

Invest in enhanced digital solutions

Oil and natural gas E&P companies increasingly seek to leverage data and analytics to enable more timely and effective decision-making. ChampionX intends to meet these needs by continuing its investment in digital innovation. ChampionX currently offers platforms that allow it to collaborate with its customers to help optimize the efficiency of their operations and provide and analyze real-time data from remote sensing technologies. ChampionX’s digital product and service offerings allow it to help its customers minimize risk, achieve their production targets and maximize profitability no matter their location. Furthermore, through its internal knowledge sharing system, it is able to leverage the experience and knowledge of its employees to help its customers predict and solve their toughest challenges.

Competition

The markets in which ChampionX operates are highly competitive. The principal bases of competition in ChampionX’s markets are customer service, market expertise, breadth of product offering, product quality and performance, supply chain capabilities, price and innovation. ChampionX has built its business on delivering value to its customers across the globe through its extensive industry experience and knowledge, technical expertise, differentiated technology, customer service, procurement and logistics capabilities and emphasis on safety and environmental leadership.

 

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ChampionX’s key competitors include: Baker Hughes Company; Clariant AG; Multi-Chem, a Halliburton Service; and M-I SWACO, a Schlumberger company.

Customers, Sales and Distribution

ChampionX has built its business through high-touch customer service, and its focus on its customers’ needs is central to ChampionX’s goal of creating value for all of its stakeholders. Utilizing its deep industry experience and technical expertise, ChampionX seeks to develop collaborative relationships with its customers to help them achieve peak performance throughout the life cycle of their assets by identifying and managing the challenges they face. ChampionX’s products and services are primarily marketed and sold directly by its field sales personnel and corporate account leaders, as well as through technical seminars, tradeshows and various digital and print advertising materials. ChampionX’s sales employees partner with its customers to understand their technical challenges and needs and proactively work with them to provide solutions that leverage ChampionX’s portfolio of products and services across the drilling, production and midstream markets. In certain markets ChampionX utilizes joint ventures and independent third-party distributors and sales agents to sell and market products and services. ChampionX’s key products, each of which constitute over 10% of net sales, are corrosion inhibitors, scale inhibitors and emulsion breakers.

The following chart details ChampionX’s net sales by geographic region for 2019:

 

 

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Deliveries of ChampionX’s products to customers are made from its manufacturing facilities, blending facilities and a network of owned and leased distribution centers. ChampionX also utilizes third-party logistics service providers to facilitate the distribution of its products.

Working Capital

ChampionX maintains an adequate level of working capital to support its business needs. There are no unusual industry practices or requirements relating to working capital items in either Oilfield Performance or Specialty

Performance.

Investments in Equipment

ChampionX has invested in the past, and expects to continue to invest in the future, in process control and monitoring equipment consisting primarily of systems used by customers to dispense its products as well as to

 

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monitor water systems or corrosion in pipelines. For additional information regarding investments in equipment, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations of ChampionX—Investing Activities.”

Manufacturing

ChampionX manufactures the majority of its products and related equipment in facilities that it operates. For 2020, ChampionX anticipates that approximately 60% of its total product volumes will be manufactured in manufacturing facilities that it owns or leases, slightly less than 20% of its total product volumes will be provided through intercompany manufacturing agreements with Ecolab-owned or Ecolab-leased manufacturing facilities, and the remaining 20% of its total product volumes will be provided through other third-party manufacturers or suppliers.

Joint Ventures

ChampionX has, over time, entered into joint ventures with unaffiliated third parties in order to meet local ownership requirements, to achieve quicker operational scale, to expand its ability to provide its customers a more fully integrated offering of products and services and to provide other benefits to its business and its customers. During 2019, the impact of ChampionX’s joint ventures on its combined net sales was less than 5%. These joint ventures may support activities for both the Oilfield Performance and Specialty Performance businesses, with the majority of joint venture activity supporting Oilfield Performance.

The table below identifies ChampionX’s most significant joint ventures and their locations, categorized according to the primary purpose of the joint venture.

 

Local Ownership Requirements / Geographic Expansion

Joint Venture

  

Location

ChampionX Químicos Lda.

  

Angola

ChampionX Equatorial Guinea Sarl

  

Equatorial Guinea

ChampionX Oilfield Solutions Ghana Ltd

  

Ghana

ChampionX Dai-ichi India Private Limited

  

India

RauanNalco LLP

  

Kazakhstan

Malaysian Energy Chemical & Services Sdn. Bhd.

  

Malaysia

ChampionX Oilfield Solutions Nigeria Ltd

  

Nigeria

Champion Arabia Limited

  

Saudi Arabia

Emirates National Chemicals Company LLC

  

United Arab Emirates

Manufacturing Capability

Joint Venture

  

Location

Petrochem Performance Products

  

Azerbaijan

ChampionX will continue to evaluate the potential for partnerships and joint ventures that can assist it in increasing its geographic, technological and product reach or enhance product and service offerings to its customers.

Intellectual Property

ChampionX owns a large portfolio of patents, trademarks, licenses and other intellectual property, which have been acquired over time and, to the extent applicable, expire at various times over a number of years. ChampionX occasionally licenses third-party intellectual property to supplement its product and service offerings. ChampionX also has an active program to protect its intellectual property by filing for patents and registering trademarks around the world and pursuing legal action, when appropriate, to prevent infringement. Key trademarks ChampionX owns include those related to ChampionX. These trademarks are registered or

 

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applied for in all of ChampionX’s key markets, and ChampionX anticipates maintaining them indefinitely. While ChampionX’s intellectual property portfolio contributes to its innovative product and service offerings, ChampionX does not believe that the loss or expiration of any particular intellectual property right would materially affect its financial results.

Research and Development

ChampionX delivers value and performance to its customers through its investment in innovative technologies. Technology has become increasingly critical in ChampionX’s industry as maturing global oil and natural gas reservoirs, acceleration of production decline, increasingly complex well designs and an aging workforce stress existing infrastructure and systems. Despite fluctuations in the number of wells drilled, E&P companies have consistently increased their expenditures on technology to improve oil and natural gas recovery and lower their costs. ChampionX has invested substantially in building its research and development capabilities and digital and other technology offerings, all of which it believes help its customers minimize risk, achieve production targets, extend field life and maximize profitability in a safe and responsible manner.

ChampionX’s research and development program focuses on the following activities:

 

   

Developing next-generation technology for all aspects of oil and natural gas production, including both conventional and unconventional, and across the entire life cycle of a producing asset.

 

   

Enhancing its ability to predict, identify and solve its customers’ operational challenges with its portfolio of products and services.

 

   

Decreasing the cost of the products and services that it brings to market by using innovation to drive operational efficiency.

ChampionX’s key research and development disciplines include analytical and material science, chemical synthesis, formulation science, microbiology, reservoir engineering, software engineering, process and equipment. ChampionX also has a robust external innovation program that leverages the capabilities and knowledge of key suppliers and joint development programs with start-up companies. Furthermore, ChampionX has a number of technical specialists embedded in key geographies to provide an efficient channel to deploy its new technologies in the major oil and natural gas markets around the world.

Raw Materials

ChampionX uses a wide variety of raw materials in manufacturing its products. These include inorganic chemicals, including alkalis, acids, biocides, phosphonates, phosphorous materials, silicates and salts, and organic chemicals, including acids, alcohols, amines, fatty acids, surfactants, solvents, monomers and polymers. ChampionX also purchases packaging materials for its manufactured products and components for its specialized dispensing equipment and systems. ChampionX purchases more than 4,000 raw materials, with the largest single raw material representing less than 3% of its raw material purchases. Raw materials, apart from a few specialized chemicals that ChampionX manufactures, are generally purchased on a contract basis and are ordinarily available in adequate quantities from a diverse group of suppliers globally. When practical, ChampionX utilizes global sourcing to align supply and production locations to control costs.

Environmental and Regulatory Considerations

ChampionX’s businesses are subject to various legislative enactments and regulations relating to the protection of the environment and public health. While ChampionX cooperates with governmental authorities and takes what it believes are appropriate measures to meet regulatory requirements and avoid or limit environmental effects, environmental risks are inherent in ChampionX’s businesses. Among such risks are costs associated with transporting and managing hazardous materials, waste disposal and plant site cleanup; and fines and penalties if

 

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ChampionX is found to be in violation of applicable environmental laws or permits issued pursuant to applicable environmental laws. Evolving chemical regulations could disrupt its business if they require ChampionX to reformulate, recall or discontinue the production of products impacted by such regulations. In addition, the demand for certain of its products and services is dependent upon or might be limited by environmental laws and regulations. Changes in these laws and regulations, such as air pollution regulations and regulations relating to oil and natural gas production (including those related to hydraulic fracturing), could impact the sales of some of its products or services. In addition to an increase in costs of manufacturing and delivering products, a change in production regulations or product regulations could result in interruptions to ChampionX’s business and financial losses should it be unable to meet the demands of its customers for products.

Although ChampionX is not currently aware of any such circumstances, there can be no assurance that future legislation or enforcement policies will not have a material adverse effect on ChampionX’s consolidated results of operations, financial position or cash flows. The environmental and regulatory matters that are most significant to ChampionX are discussed below.

TSCA: The United States’ primary chemicals management law, the Toxic Substances Control Act (“TSCA”), was updated in 2016 with the passage of the Frank R. Lautenberg Chemical Safety for the 21st Century Act (“LCSA”). LCSA modernizes the original 1976 legislation, aiming to establish greater public confidence in the safety of chemical substances in commerce. For ChampionX, the updates to TSCA have to date resulted in increased costs, including increased testing costs and agency fees, associated with the registration of new chemicals with the U.S. Environmental Protection Agency (“EPA”). LCSA also requires the EPA to evaluate the safety of existing chemicals, starting with those most likely to pose risks to public health and safety, and as a result, LCSA could impose additional testing and other requirements with respect to existing chemical registrations.

REACH: In 2006, the European Union enacted a regulatory framework for the Registration, Evaluation and Authorization of Chemicals (“REACH”). It established a European Chemicals Agency responsible for evaluating data to determine hazards and risks of chemicals and to manage the program for authorization of chemicals for sale and distribution in European Union member countries. Other countries have implemented or are implementing regulatory frameworks similar to REACH. Costs to ChampionX of complying with REACH and these similar regulatory frameworks have not been, and are not expected to be, material.

GHS: In 2003, the United Nations adopted a standard on hazard communication and labeling of chemical products known as the Globally Harmonized System of Classification and Labeling of Chemicals (“GHS”). GHS is designed to facilitate international trade and increase safe handling and use of hazardous chemicals through a worldwide system that classifies chemicals based on their intrinsic hazards and communicates information about those hazards through standardized product labels and safety data sheets. Costs to ChampionX of complying with GHS have not been, and are not expected to be, material.

Biocide Legislation: Various international, federal and state environmental laws and regulations govern the manufacture and/or use of biocidal active substances and products. ChampionX manufactures and sells disinfecting and material preservation products that kill or reduce microorganisms such as bacteria, viruses and fungi on hard environmental surfaces and in process fluids. Such products constitute “antimicrobial pesticides” under the current definitions of the Federal Insecticide, Fungicide, and Rodenticide Act, as amended by the Food Quality Protection Act of 1996, the principal U.S. federal statute governing the manufacture, labeling, handling and use of pesticides, or “biocides,” in other countries around the world. ChampionX maintains biocide registrations for relevant products with the EPA and other relevant government agencies around the world. Registration entails the necessity to meet applicable efficacy, toxicity and labeling requirements and to pay on-going registration fees. In addition, each state in which these products are sold requires registration and payment of a fee. While the cost of complying with rules relating to biocides is not material to ChampionX, those costs continue to increase, and ChampionX has experienced increasing delays in receiving the necessary approvals for these products.

 

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Other Environmental Legislation: ChampionX’s manufacturing plants are subject to federal, state, local or foreign laws and regulations relating to discharge of hazardous substances into the environment and to the transportation, handling and disposal of these substances. The primary federal statutes that apply to ChampionX’s activities in the United States are the Clean Air Act, the Clean Water Act and the Resource Conservation and Recovery Act. ChampionX is also subject to the Superfund Amendments and Reauthorization Act of 1986, which imposes reporting requirements relating to emissions of hazardous substances into the air, land and water. The products ChampionX produces and distributes into European Union member countries are also subject to directives governing electrical waste (WEEE Directive 2012/19/EU) and the restriction on certain hazardous substances incorporated into electrical or electronic products (RoHS Directive 2011/65/EU). Similar legal requirements apply to its facilities globally. ChampionX makes capital investments and incurs ongoing operating expenditures to comply with environmental laws and regulations, to promote employee safety and to carry out its announced environmental sustainability principles. To date, these expenditures have not been material to ChampionX. Hydraulic Fracturing: ChampionX supplies various products and services used in the hydraulic fracturing industry, which has been the subject of various laws, regulations and restrictions at the national, regional and state levels. Some of these laws, regulations and restrictions include requirements for ingredient disclosures, which may create constraints on ChampionX’s business operations. Some jurisdictions have banned or limited, or plan to ban or limit, the practice of hydraulic fracturing, posing risks to that industry sector. To date, laws and regulations governing hydraulic fracturing have not had a material negative impact on ChampionX’s business.

Climate Change: Various laws and regulations pertaining to climate change have been implemented or are being considered for implementation at the international, national, regional and state levels, particularly as they relate to the reduction of greenhouse gas (“GHG”) emissions. These laws and regulations apply directly to ChampionX’s customers, but generally not to ChampionX at the present time. ChampionX may be impacted in the future to the extent that such laws and regulations negatively impact the exploration, production and use of oil and natural gas. Environmental Remediation and Proceedings: Along with numerous other potentially responsible parties (“PRP”), ChampionX is currently involved with site clean-up activities pursuant to the federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”, also known as “Superfund”) or state equivalents at 12 sites in the United States. ChampionX is also currently subject to similar remediation obligations at four sites outside the United States. Under CERCLA and similar U.S. state laws, the parties that may be held liable for the costs to investigate and remediate contaminated sites, including the current and former owners and operators of such sites and the parties that arranged for the disposal of hazardous substances to the site (“potentially responsible parties,” or “PRPs”), are typically jointly and severally liable for the costs associated with cleaning up the site and in some cases, for natural resource damages caused by the contamination at or emanating from a site. Customarily, the PRPs will work with the EPA to agree upon and implement a plan for site remediation. ChampionX’s remedial obligations at sites outside the United States are associated with facilities that ChampionX currently or formerly owned or operated, other than sites retained by Ecolab in connection with the Transactions. Based on an analysis of (i) ChampionX’s experience with such environmental proceedings, (ii) its estimated share (measured by mass or volume, depending on the site) of the hazardous substances disposed or sent to the sites referred to in the preceding paragraph, and (iii) its estimate of the contribution to be made by other PRPs that ChampionX believes have the financial ability to pay their allocated share of investigation and remediation costs, ChampionX has accrued its best estimate of its probable future costs relating to these sites. In establishing accruals, potential insurance reimbursements are not included. The accruals are not discounted. It is not feasible to predict when the amounts accrued will be paid due to the uncertainties inherent in the environmental remediation and associated regulatory processes.

ChampionX has also been named as a defendant in a number of lawsuits alleging personal injury due to exposure to hazardous substances in connection with its products and services. While ChampionX does not currently believe that any of these lawsuits will be material to it, there can be no assurance that these matters will not have, either individually or in the aggregate, a material adverse effect on ChampionX’s consolidated results of operations, financial position or cash flows.

 

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ChampionX’s accruals at December 31, 2019 for probable future environmental remediation expenditures, excluding potential insurance reimbursements, totaled approximately $9.4 million. ChampionX reviews its exposure for environmental remediation costs periodically and adjusts its accruals as it considers appropriate. While the final resolution of these issues could result in costs below or above current accruals and could, therefore, have an impact on ChampionX’s consolidated financial results in a future reporting period, ChampionX believes the ultimate resolution of these matters will not have a material effect on its consolidated results of operations, financial position or cash flows.

Employees

ChampionX expects to employ approximately 5,400 people in over 55 countries as of the Distribution. Approximately 5% of these employees are covered by collective bargaining agreements or similar labor arrangements. ChampionX believes that it has strong employee engagement and good relations with its workforce.

Properties

ChampionX’s corporate headquarters is located in a company-owned facility in Sugar Land, Texas. ChampionX owns and operates research and technology centers in Sugar Land, Texas; Calgary, Canada; Kazan, Russia; and Aberdeen, Scotland. ChampionX has significant regional administrative facilities located in Dubai, United Arab Emirates; Buenos Aires, Argentina; and Bogota, Colombia, which is a leased facility. ChampionX also has a network of small leased sales offices around the world.

ChampionX has a robust global manufacturing facility network that supports its supply chain strategy to manufacture products wherever an economic, process or quality assurance advantage exists or where proprietary manufacturing techniques require in-house production. Most products that ChampionX sells are manufactured at its facilities. ChampionX positions manufacturing locations and warehouses in a manner to provide timely access to customers.

ChampionX’s manufacturing facilities produce chemical products for each of its operating segments. ChampionX’s chemical production process consists of producing intermediates via basic reaction chemistry and subsequently blending and packaging those intermediates with other purchased raw materials into finished products in powder, solid and liquid form.

The following table profiles ChampionX properties with approximately 70,000 square feet or more.

 

Location

   Approximate
Sq. Ft.
     Type of Property    Owned /Leased

Odessa, Texas, United States

     435,000      Manufacturing Facility    Owned

Sugar Land, Texas, United States

     350,000      Offices, Manufacturing Facility and
Research Labs
   Owned

Fawley, United Kingdom

     350,000      Manufacturing Facility    Leased

Soledad, Colombia

     276,000      Manufacturing Facility    Owned

Jurong Island, Singapore

     250,000      Manufacturing Facility    Leased

Freeport, Texas, United States

     189,000      Manufacturing Facility    Owned

Corsicana, Texas, United States

     137,000      Manufacturing Facility    Owned

Aberdeen, United Kingdom

     118,000      Research Labs and Manufacturing Facility    Owned

Sterlitamak, Russia

     115,000      Manufacturing Facility    Owned

Calgary, Canada

     94,000      Research Labs and Manufacturing Facility    Owned

LeDuc, Canada

     81,000      Manufacturing Facility    Owned

Garyville, Louisiana, United States

     70,000      Manufacturing Facility    Leased

 

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ChampionX believes that its manufacturing facilities are adequate to meet its existing in-house production needs. ChampionX continues to invest in its manufacturing facilities to maintain viable operations and to add capacity as necessary to meet customer needs and business objectives.

Most of ChampionX’s manufacturing facilities also serve as distribution centers. In addition, ChampionX operates dedicated distribution centers around the world, most of which are leased.

Legal Proceedings

ChampionX and its subsidiaries are parties to various lawsuits, claims and environmental actions that have arisen in the ordinary course of business. These include, from time to time, commercial, patent infringement, product liability and employment lawsuits, as well as possible obligations to investigate and mitigate the effects on the environment of the disposal or release of certain chemical substances at various sites, such as Superfund sites and other operating or closed facilities. ChampionX has established accruals for certain lawsuits, claims and environmental matters. While it is not possible at this time to predict the outcome of these matters, in the opinion of management, ChampionX is not currently involved in any legal proceedings that, individually or in the aggregate, could have a material effect on ChampionX’s financial condition, results of operations or cash flows.

Matters Related to Deepwater Horizon Incident Response

On April 22, 2010, the deepwater drilling platform, the Deepwater Horizon, operated by a subsidiary of BP plc, sank in the Gulf of Mexico after a catastrophic explosion and fire that began on April 20, 2010. A massive oil spill resulted. Approximately one week following the incident, subsidiaries of BP plc, under the authorization of the responding federal agencies, formally requested the COREXIT Defendants to supply large quantities of COREXIT 9500, an oil dispersant product listed on the U.S. EPA National Contingency Plan Product Schedule. The COREXIT Defendants responded immediately by providing available COREXIT and increasing production to supply the product to BP’s subsidiaries for use, as authorized and directed by agencies of the federal government throughout the incident. Prior to the incident, the COREXIT Defendants had not provided products or services or otherwise had any involvement with the Deepwater Horizon platform. On July 15, 2010, BP announced that it had capped the leaking well, and the application of dispersants by the responding parties ceased shortly thereafter.

On May 1, 2010, the President of the United States appointed retired U.S. Coast Guard Commandant Admiral Thad Allen to serve as the National Incident Commander in charge of the coordination of the response to the incident at the national level. The EPA directed numerous tests of all the dispersants on the National Contingency Plan Product Schedule, including those provided by the COREXIT Defendants, “to ensure decisions about ongoing dispersant use in the Gulf of Mexico are grounded in the best available science.” The COREXIT Defendants cooperated with this testing process and continued to supply COREXIT, as requested by BP and government authorities. The use of dispersants by the responding parties was one tool used by the government and BP to avoid and reduce damage to the Gulf area from the spill.

In connection with its provision of COREXIT, the COREXIT Defendants have been named in several lawsuits as described below.

Cases arising out of the Deepwater Horizon accident were administratively transferred for pre-trial purposes to a judge in the United States District Court for the Eastern District of Louisiana (the “Court”) with other related cases under In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, Case No. 10-md-02179 (E.D. La.) (“MDL 2179”). The COREXIT Defendants were named, along with other unaffiliated defendants, in six putative class action complaints related to the Deepwater Horizon oil spill and 21 complaints filed by individuals. Those complaints were consolidated in MDL 2179. The complaints generally allege, among other things, strict liability and negligence relating to the use of COREXIT dispersant in connection with the Deepwater Horizon oil spill.

 

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Pursuant to orders issued by the Court in MDL 2179, the claims were consolidated in several master complaints, including one naming the COREXIT Defendants and others that responded to the Deepwater Horizon oil spill (known as the “B3 Master Complaint”). On May 18, 2012, the COREXIT Defendants filed a motion for summary judgment against the claims in the B3 Master Complaint, on the grounds that: (i) the plaintiffs’ claims are preempted by the comprehensive oil spill response scheme set forth in the Clean Water Act and National Oil and Hazardous Substances Pollution Contingency Plan (the “National Contingency Plan”); and (ii) the COREXIT Defendants are entitled to derivative immunity from suit. On November 28, 2012, the Court granted the COREXIT Defendants’ motion and dismissed with prejudice the claims in the B3 Master Complaint asserted against the COREXIT Defendants. The Court held that such claims were preempted by the Clean Water Act and National Contingency Plan. Because claims in the B3 Master Complaint remained pending against other defendants, the Court’s decision was not a “final judgment” for purposes of appeal. Under Federal Rule of Appellate Procedure 4(a), plaintiffs will have 30 days after entry of final judgment to appeal the Court’s decision.

In December 2012 and January 2013, the MDL 2179 court issued final orders approving two settlements between BP and plaintiffs’ class counsel: (1) a proposed Medical Benefits Class Action Settlement; and (2) a proposed Economic and Property Damages Class Action Settlement. Pursuant to the proposed settlements, class members agree to release claims against BP and other released parties, including the COREXIT Defendants.

The COREXIT Defendants, the incident defendants and the other responder defendants have been named as first party defendants by Transocean Deepwater Drilling, Inc. and its affiliates (the “Transocean Entities”) (In re the Complaint and Petition of Triton Asset Leasing GmbH, et al, MDL No. 2179, Civil Action 10-2771). In April and May 2011, the Transocean Entities, Cameron International Corporation, Halliburton Energy Services, Inc., M-I L.L.C., Weatherford U.S., L.P. and Weatherford International, Inc. (collectively, the “Cross Claimants”) filed cross claims in MDL 2179 against the COREXIT Defendants and other unaffiliated cross defendants. The Cross Claimants generally allege, among other things, that if they are found liable for damages resulting from the Deepwater Horizon explosion, oil spill and/or spill response, they are entitled to indemnity or contribution from the cross defendants.

In April and June 2011, in support of its defense of the claims against it, the COREXIT Defendants filed counterclaims against the Cross Claimants. In its counterclaims, the COREXIT Defendants generally allege that if they are found liable for damages resulting from the Deepwater Horizon explosion, oil spill and/or spill response, they are entitled to contribution or indemnity from the Cross Claimants.

In May 2016, the COREXIT Defendants were named in nine additional complaints filed by individuals alleging, among other things, business and economic loss resulting from the Deepwater Horizon oil spill (“B1” claims). In April 2017, the COREXIT Defendants were named in two additional complaints filed by individuals alleging, among other things, business and economic loss resulting from the Deepwater Horizon oil spill. The plaintiffs in these lawsuits are generally seeking awards of unspecified compensatory and punitive damages, and attorneys’ fees and costs. These actions have been consolidated in MDL 2179.

On February 22, 2017, the Court dismissed the B3 Master Complaint and ordered that plaintiffs who had previously filed a claim that fell within the scope of the B3 Master Complaint and who had “opted out” of and not released their claims under the Medical Benefits Class Action Settlement either: (1) complete a sworn statement indicating, among other things, that they opted out of the Medical Benefits Class Action Settlement (to be completed by plaintiffs who previously filed an individual complaint); or (2) file an individual lawsuit attaching the sworn statement as an exhibit, by a deadline date set by the Court.

On July 10, 2018, the Court entered an order dismissing the “B1” claims against the COREXIT Defendants. In light of the Court’s orders dismissing various B3 and “B1” claims in their entirety, for most plaintiffs the Court’s November 28, 2012 grant of summary judgment for the COREXIT Defendants is now final and the deadline to appeal has passed. On October 23, 2018, a plaintiff filed a new B3 complaint against the COREXIT Defendants and other unaffiliated defendants generally alleging, among other things, negligence and gross negligence related

 

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to the use of COREXIT dispersant in connection with the Deepwater Horizon oil spill. The complaint was consolidated in MDL 2179. There currently remain three cases pending against the COREXIT Defendants relating to the Deepwater Horizon oil spill, all of which are expected to ultimately be dismissed pursuant to the Court’s November 28, 2012 order granting the COREXIT Defendants’ motion for summary judgment.

ChampionX believes the claims asserted against the COREXIT Defendants are without merit and intends to defend these lawsuits vigorously. ChampionX also believes that it has rights to contribution and/or indemnification (including legal expenses) from third parties. However, ChampionX cannot predict the outcome of these lawsuits, the involvement it might have in these matters in the future, or the potential for future litigation.

Environmental-Related Legal Proceedings

For discussion of other environmental-related legal proceedings, see “—Environmental and Regulatory Considerations.”

 

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HISTORICAL AND PRO FORMA PER SHARE INFORMATION, MARKET PRICE AND DIVIDEND INFORMATION

Historical and Pro Forma Per Share Information

The following tables set forth certain historical and pro forma per share information for Ecolab and Apergy. The Ecolab historical information has been derived from and should be read together with Ecolab’s audited consolidated financial statements and accompanying notes contained in Ecolab’s Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference into this prospectus. The Apergy historical information has been derived from and should be read together with Apergy’s audited consolidated financial statements and accompanying notes contained in Apergy’s Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference into this prospectus. Ecolab’s pro forma information has been derived from the “Unaudited Pro Forma Condensed Consolidated Financial Statements of Ecolab” included elsewhere in this prospectus. Apergy’s pro forma information has been derived from the “Unaudited Pro Forma Condensed Combined Financial Statements of Apergy” included elsewhere in this prospectus.

Ecolab, Apergy and ChampionX may have performed differently had the Transactions occurred prior to the period or as of the date presented. The pro forma per share information does not purport to represent what the actual results of operations or the financial position would have been had the Transactions occurred on the dates assumed, nor is it indicative of the future results of operations or financial position of Ecolab, Apergy and ChampionX following the Transactions.

Ecolab

 

     As of and for the Year Ended
December 31, 2019
 

(in millions, except per share amounts)

   Historical      Pro Forma  

Earnings attributable to Ecolab per common share

     

Basic

   $ 5.41      $ 5.04  

Diluted

   $ 5.33      $ 4.96  

Weighted-average common shares outstanding

     

Basic

     288.1        283.0  

Diluted

     292.5        287.4  

Book value per share of common stock

   $ 30.26      $ 19.93  

Cash dividends declared per share of common stock

   $ 1.85      $ 1.85  

Apergy

 

     As of and for the Year Ended
December 31, 2019
 

(in millions, except per share amounts)

   Historical      Pro Forma  

Earnings attributable to Apergy per common share

     

Basic

   $ 0.67      $ 1.26  

Diluted

   $ 0.67      $ 1.26  

Weighted-average common shares outstanding

     

Basic

     77.4        205.0  

Diluted

     77.6        205.2  

Book value per share of common stock

   $ 13.38      $ 9.96  

Cash dividends declared per share of common stock

   $ —        $ —    

 

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ChampionX equivalent pro forma per share information under varying exchange rate assumptions

The unaudited pro forma per share information assumes that the Transactions are effected through a fully subscribed exchange offer with approximately 5.1 million shares of Ecolab common stock tendered and exchanged for approximately 122.0 million shares of ChampionX common stock, reflecting an assumed exchange ratio of 23.9627 shares of ChampionX common stock for each share of Ecolab common stock exchanged. Such exchange ratio has been determined by applying an indicative assumed discount of 10% and dividing the closing price of Ecolab’s common stock of $180.08 per share as of April 24, 2020 by 90% of the closing price of Apergy common stock of $8.35 per share as of April 24, 2020. Note the actual exchange ratio of Ecolab common stock to ChampionX common stock will be based on a calculated VWAP upon the terms and conditions disclosed elsewhere in this prospectus. The range of equivalent pro forma per share information as of and for the year ended December 31, 2019 shown below is calculated by multiplying the Apergy pro forma per share amounts by the exchange ratio based on varying exchange outcomes of ChampionX common stock for each share of Ecolab common stock tendered in this Exchange Offer.

 

Ecolab Common Stock   Apergy Common Stock   Exchange Ratio     Calculated
basic earnings
per common
share
    Calculated
diluted
earnings per
common share
    Calculated
book value per
share of
common stock
    Cash dividends
declared per
share of
common stock
 

As of April 24, 2020

  As of April 24, 2020     23.9627     $ 30.22     $ 30.19     $ 238.78     $ —  

Down 10%

  Up 10%     19.6059     $ 24.73     $ 24.70     $ 195.37     $ —  

Down 10%

  Unchanged     21.5665     $ 27.20     $ 27.17     $ 214.90     $ —  

Down 10%

  Down 10%     23.9627     $ 30.22     $ 30.19     $ 238.78     $ —  

Unchanged

  Up 10%     21.7843     $ 27.47     $ 27.45     $ 217.07     $ —  

Unchanged

  Down 10%     26.6253     $ 33.58     $ 33.55     $ 265.31     $ —  

Up 10%

  Up 10%     23.9627     $ 30.22     $ 30.19     $ 238.78     $ —  

Up 10%

  Unchanged     26.3590     $ 33.24     $ 33.21     $ 262.66     $ —  

Up 10%

  Down 10%     29.2878     $ 36.94     $ 36.90     $ 291.85     $ —  

Certain Market Price and Dividend Information

Historical market price data for ChampionX has not been presented because the ChampionX Business is currently owned and operated by Ecolab and there is no established trading market for ChampionX common stock. ChampionX common stock does not currently trade separately from Ecolab common stock.

Ecolab common stock currently trades on the NYSE under the ticker symbol “ECL.” On December 18, 2019, the last trading day before the announcement of the Transactions, the closing price of Ecolab common stock was $185.69 per share. On April 29, 2020, the last practicable trading day for which information is available as of the date of this prospectus, the closing price of Ecolab common stock was $197.58 per share.

Apergy common stock currently trades on the NYSE under the ticker symbol “APY.” On December 18, 2019, the last trading day before the announcement of the Transactions, the closing price of Apergy common stock was $30.67 per share. On April 29, 2020, the last practicable trading day for which information is available as of the date of this prospectus, the closing price of Apergy common stock was $10.68 per share.

Apergy Dividend Policy

Apergy has never declared or paid dividends on its common stock.

Per the terms of the Merger Agreement, Apergy is currently restricted from declaring and paying any dividends prior to the effective time of the Merger. Any determination as to the declaration of future dividends following such time is at the sole discretion of the Apergy Board of Directors. Following the Merger, the reconstituted Apergy Board of Directors intends to consider the declaration and payment of any additional future dividends

 

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based on a number of factors, including the results of Apergy’s operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors the Apergy Board of Directors deems relevant.

Ecolab Dividend Policy

Declarations of dividends on Ecolab’s common stock are made at the discretion of Ecolab’s Board of Directors. Among other things, Ecolab’s Board of Directors evaluates business conditions and earnings. In December 2019, Ecolab’s Board of Directors declared a quarterly dividend of $0.47 per share (paid in January 2020), a one cent increase over declared dividends in the previous four quarters. Ecolab’s Board of Directors expects that comparable cash dividends will continue to be paid in the future.

 

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SELECTED HISTORICAL COMBINED FINANCIAL INFORMATION OF CHAMPIONX

The following table presents ChampionX’s selected historical combined financial information, consisting of historical combined financial information of ChampionX as of the dates and for the periods presented. The selected historical combined financial information as of December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017 has been derived from ChampionX’s audited combined financial statements included elsewhere in this prospectus. The selected historical combined financial information as of December 31, 2017 and for the year ended December 31, 2016 has been derived from ChampionX’s audited combined financial statements that are not included in this prospectus. The selected historical combined financial information as of December 31, 2016 and 2015 and for the year ended December 31, 2015 has been derived from ChampionX’s unaudited combined financial statements that are not included in this prospectus. In ChampionX’s opinion, the unaudited combined financial statements for these periods have been prepared on the same basis as the audited combined financial statements included elsewhere in this prospectus and include all adjustments, consisting only of normal recurring adjustments and allocations, necessary for a fair statement of the information for the periods presented.

The selected historical combined financial information includes costs of ChampionX’s business, which include the allocation of certain corporate expenses from Ecolab. ChampionX believes these allocations were made on a reasonable basis. The selected historical combined financial information may not be indicative of ChampionX’s future performance. It should be read in conjunction with the discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations of ChampionX” and the ChampionX combined financial statements and accompanying notes included elsewhere in this prospectus.

 

     December 31,  
(in millions)    2019      2018      2017      2016      2015(1)  

Year ended:

              

Net sales

   $ 2,332.0      $ 2,431.5      $ 2,290.0      $ 2,185.1      $ 2,796.6  

Operating income

     155.4        117.5        88.3        20.1        43.8  

Net income attributable to ChampionX

     133.4        102.2        167.1        21.8        16.3  

EBITDA(2)

     373.1        350.5        318.4        245.4        245.6  

Adjusted EBITDA(2)

     382.1        366.6        342.5        318.1        501.2  

As of:

              

Total assets

   $ 4,301.1      $ 4,353.6      $ 4,519.1      $ 4,487.6      $ 4,831.9  

Long-term debt (excluding portions due within one year)

     0.3        0.1        0.1        0.3        0.1  

 

(1)

Selected historical combined financial information of ChampionX for the year ended December 31, 2015 is not presented on a comparable basis due to the adoption of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers.

(2)

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of ChampionX—Non-GAAP Financial Measures” elsewhere in this prospectus for additional information on ChampionX’s use of non-GAAP measures. EBITDA and adjusted EBITDA are non-GAAP financial measures. EBITDA is defined as net income including noncontrolling interest excluding income tax expense (benefit), interest (income) expense, net, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding special (gains) and charges, net. A reconciliation of EBITDA and adjusted EBITDA to their most comparable GAAP measure for the periods presented above is as follows:

 

     Year Ended December 31,  
(in millions)    2019(a)     2018(b)      2017(c)     2016(d)      2015(e)  

Net income including noncontrolling interest

   $ 141.1     $ 103.7      $ 169.3     $ 33.7      $ 40.8  

Income tax expense (benefit)

     31.2       35.5        (61.9     2.0        6.2  

Interest (income) expense, net

     (0.9     —          —         —          —    

Depreciation

     88.4       88.0        87.6       85.6        79.6  

 

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     Year Ended December 31,  
(in millions)    2019(a)      2018(b)      2017(c)      2016(d)      2015(e)  

Amortization

     113.3        123.3        123.4        124.1        119.0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

     373.1        350.5        318.4        245.4        245.6  

Special (gains) and charges, net

     9.0        16.1        24.1        72.7        255.6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 382.1      $ 366.6      $ 342.5      $ 318.1      $ 501.2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(a)

Special (gains) and charges, net, in the year ended December 31, 2019 included net restructuring charges of $18.0 million, a gain of $9.5 million for costs recovered from a dispute related to a contract terminated in 2017 and other charges $0.5 million.

(b)

Special (gains) and charges, net, in the year ended December 31, 2018 included net restructuring charges of $14.8 million and other charges of $1.3 million.

(c)

Special (gains) and charges, net, in the year ended December 31, 2017 included a fixed asset impairment of $16.0 million, a contract termination charge of $11.1 million, net restructuring charges of $6.6 million, a gain of $8.7 million from U.S. dollar cash recoveries of intercompany receivables written off when Venezuelan subsidiaries were deconsolidated and other gains of $0.9 million.

(d)

Special (gains) and charges, net, in the year ended December 31, 2016 included charges related to the energy downturn of $76.8 million, net restructuring charges of $1.1 million, a gain of $5.1 million from Venezuelan devaluation and U.S. dollar cash recoveries of intercompany receivables written off when Venezuelan subsidiaries were deconsolidated and insignificant other charges of $0.1 million.

(e)

Special (gains) and charges, net, in the year ended December 31, 2015 included charges related to the deconsolidation of Venezuelan subsidiaries of $203.1 million, net restructuring charges of $42.8 million, inventory charges of $5.7 million and acquisition and integration costs of $4.0 million.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF ECOLAB

The selected historical consolidated financial information of Ecolab as of December 31, 2019 and 2018, and for the years ended December 31, 2019, 2018 and 2017, has been derived from Ecolab’s audited consolidated financial statements and related notes contained in the Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference into this prospectus. The selected historical consolidated financial information as of December 31, 2017, 2016 and 2015, and for the years ended December 31, 2016 and 2015, has been derived from Ecolab’s audited consolidated financial statements that are not included or incorporated by reference into this prospectus. The selected historical consolidated financial information below is not necessarily indicative of the results that may be expected for any future period. The selected historical consolidated financial information presented below has been derived from, and should be read together with, Ecolab’s consolidated financial statements and the accompanying notes and the related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Selected Financial Data” sections included in Ecolab’s Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference into this prospectus. For more information, see the section entitled “Where You Can Find Additional Information; Incorporation by Reference.”

 

    December 31,  
(in millions, except per share amounts)   2019(1)     2018(2)     2017(3)     2016(4)     2015(5)  

Year ended:

         

Net sales

  $ 14,906.3     $ 14,668.2     $ 13,835.9     $ 13,151.8     $ 13,545.1  

Operating income

    2,013.8       1,947.0       1, 950.1       1,870.2       1,561.3  

Net income attributable to Ecolab

    1,558.9       1,429.1       1,504.6       1,229.0       1,002.1  

Basic earnings per share

    5.41       4.95       5.20       4.20       3.38  

Diluted earnings per share, as reported (U.S. GAAP)

    5.33       4.88       5.12       4.14       3.32  

Cash dividends declared per common share

    1.85       1.69       1.52       1.42       1.34  

Diluted earnings per share, as reported (U.S. GAAP)

  $ 5.33     $ 4.88     $ 5.12     $ 4.14     $ 3.32  

Adjustments:

         

Special (gains) and charges

    0.69       0.35       0.19       0.21       1.25  

Discrete tax expense (benefits)

    (0.20     0.02       (0.63     0.01       (0.21
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted diluted earnings per share (Non-GAAP)

  $ 5.82     $ 5.25     $ 4.68     $ 4.37     $ 4.37  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of:

         

Total assets

  $ 20,869.1     $ 20,074.5     $ 19,963.5     $ 18,331.1     $ 18,641.7  

Long-term debt (excluding portions due within one year)

    5,973.5       6,301.6       6,758.3       6,145.7       4,260.2  

 

Selected historical consolidated financial information of Ecolab for the year ended December 31, 2015 is not presented on a comparable basis due to the adoption of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers.

 

(1)

Special (gains) and charges for 2019 include the following charges net of tax, net restructuring charges of $106.6 million, ChampionX separation charges of $71.5 million, acquisition and integration charges of $9.9 million and litigation and other charges of $7.5 million.

Discrete tax expense (benefits) for 2019 include benefits associated with stock compensation excess tax benefits of $43.1 million, favorable adjustments to the estimate for U.S. tax reform one-time repatriation tax benefit of $3.1 million and other tax net benefits of $12.5 million.

 

(2)

Special (gains) and charges for 2018 include the following charges, net of tax: a commitment to the Ecolab Foundation of $18.9 million, net restructuring charges of $77.2 million, acquisition and integration of $5.7 million and litigation and other charges of $1.0 million.

 

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Discrete tax expense (benefits) for 2018 include adjustments to the estimate for U.S. tax reform one-time repatriation tax expense of $66.0 million, benefits associated with stock compensation excess tax benefits of $28.1 million, a favorable adjustment related to changes in estimates and an Internal Revenue Service (“IRS”) approved method change in the filed U.S. federal tax returns of $39.9 million and other tax expense of $6.7 million.

 

(3)

Special (gains) and charges for 2017 include the following charges, net of tax: acquisition and integration charges of $18.5 million, net restructuring charges of $32.4 million, charges related to a vendor contract termination in Ecolab’s Global Energy segment of $14.4 million and charges on extinguished debt of $13.6 million. Gains, net of tax, include gain on the sale of Ecolab’s Equipment Care business of $12.4 million, tax benefits on the repatriation of cash to the U.S. of $7.8 million and a net gain of $2.7 million from other activity.

Discrete tax expense (benefits) for 2017 include a net benefit of $158.9 million for repricing of U.S. deferred tax positions to the U.S. tax reform rate, offset by a one-time repatriation tax on foreign earnings and stock compensation excess tax benefits of $39.6 million. Expenses include recognizing adjustments from filing the 2016 U.S. federal income tax return and release of uncertain tax positions totaling $14.3 million.

 

(4)

Special (gains) and charges for 2016 include the following charges, net of tax: charges of $50.0 million associated with the downturn in the energy market and litigation related charges of $26.4 million. Gains, net of tax, include a net gain for restructuring and a net gain for other activity of $3.2 million.

Discrete tax expense (benefits) for 2016 include net expense of $3.9 million driven primarily from adjustments to deferred tax asset and liability positions, recognizing adjustments from filing the 2015 U.S. federal income tax return, tax charges related to optimizing the business structure and settlement of international tax matters offset by benefits driven primarily by the release of reserves for uncertain tax positions due to expiration of statute of limitations in non-U.S. jurisdictions, settlement of international tax matters, remeasurements of certain deferred tax assets and liabilities resulting from the application of an updated tax rate in an international jurisdiction and valuation allowance releases.

 

(5)

Special (gains) and charges for 2015 include the following charges, net of tax: Venezuelan charges of $235.7 million, restructuring charges of $75.5 million, charges of $38.3 million related to litigation related charges, a loss on the sale of a portion of the Ecovation business and the net impact of inventory reserve and inventory cost policy harmonization efforts, fixed asset impairment of $15.4 million and integration costs of $12.0 million.

Discrete tax expense (benefits) for 2015 include net benefits of $63.3 million driven primarily from the ability to recognize a worthless stock deduction for the tax basis in a wholly owned domestic subsidiary, release of valuation allowances on certain deferred tax assets and a refund claim for taxes paid in a prior period resulting from updated IRS regulations, finalization of prior year IRS audits and other statute of limitation tax reserve releases offset by a change to a deferred tax liability resulting from the Naperville facility transaction.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF APERGY

The selected historical consolidated financial information of Apergy as of December 31, 2019 and 2018, and for the years ended December 31, 2019, 2018 and 2017, has been derived from Apergy’s audited consolidated financial statements and related notes contained in the Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference into this prospectus. The selected historical consolidated financial information as of December 31, 2017, 2016 and 2015 and for the years ended December 31, 2016 and 2015, has been derived from Apergy’s audited consolidated financial statements that are not included or incorporated by reference into this prospectus. The selected historical consolidated financial information below is not necessarily indicative of the results that may be expected for any future period. The selected historical consolidated financial information presented below should be read together with Apergy’s consolidated financial statements and the accompanying notes and the related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Selected Financial Data” sections included in Apergy’s Annual Report on Form 10-K for the year ended December 31, 2019, which are incorporated by reference into this prospectus. For more information, see the section entitled “Where You Can Find Additional Information; Incorporation by Reference” beginning on page 258 of this prospectus.

 

(in thousands, except per
share data)
  Years Ended December 31,  
    2019     2018     2017     2016     2015  

Statements of Income (Loss)

         

Total revenue

  $ 1,131,251     $ 1,218,156     $ 1,010,466     $ 751,337     $ 1,076,680  

Gross profit

    377,104       417,004       320,068       195,091       382,978  

Provision for (benefit from) income taxes

    6,226       28,162       (22,164     (8,459     24,131  

Net income (loss)

    52,960       93,191       110,519       (11,615     53,134  

Net income (loss) attributable to Apergy

    52,164       92,737       109,589       (13,466     51,698  

Earnings (loss) per share attributable to Apergy:

         

Basic

  $ 0.67     $ 1.20     $ 1.42     $ (0.17   $ 0.67  

Diluted

  $ 0.67     $ 1.19     $ 1.41     $ (0.17   $ 0.66  
    As of December 31,  
(in thousands)   2019     2018     2017     2016     2015  

Balance Sheets

         

Cash and cash equivalents

  $ 35,290     $ 41,832     $ 23,712     $ 26,012     $ 10,417  

Property, plant and equipment, net

    248,181       244,328       213,562       202,528       232,886  

Total assets

    1,922,825       1,973,116       1,906,408       1,851,714       1,983,377  

Long-term debt

    559,821       663,207       5,806       2,954       3,436  

Total equity

    1,036,214       975,983       —         —         —    

Total Parent Company equity

    —         —         1,630,760       1,543,473       1,637,837  

 

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF ECOLAB

The following unaudited pro forma condensed consolidated financial statements of Ecolab were derived from its audited historical consolidated financial statements and are being presented to give effect to the proposed separation of ChampionX to be effectuated through the following transactions: (1) the separation of ChampionX from Ecolab’s other businesses, as described in note (a) below, and receipt of the Cash Payment from ChampionX, (2) the distribution, through (a) this Exchange Offer, and if this Exchange Offer is not fully subscribed, the clean-up spin-off, or (b) if this Exchange Offer is terminated by Ecolab without the exchange of shares (but the conditions to consummation of the Transactions have otherwise been satisfied), the distribution of all shares of ChampionX common stock on a pro rata basis to Ecolab stockholders in a spin-off, and (3) immediately thereafter, the merger of Merger Sub with and into ChampionX, with ChampionX becoming a wholly owned subsidiary of Apergy. The unaudited pro forma condensed consolidated financial statements of Ecolab are based on currently available information and assumptions that Ecolab’s management believe are reasonable. The pro forma adjustments included herein give effect to pro forma events that are (i) directly attributable to the Transactions, (ii) factually supportable and (iii) with respect to the unaudited pro forma condensed consolidated statement of income, expected to have a continuing impact on Ecolab’s consolidated results of operations. The unaudited pro forma condensed consolidated statement of income for the year ended December 31, 2019 reflects Ecolab’s results as if the Transactions had occurred on January 1, 2019. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2019 gives effect to the Transactions as if they had occurred on that date.

The unaudited pro forma condensed consolidated financial statements should be read in conjunction with:

 

   

the accompanying notes to the unaudited pro forma condensed consolidated financial statements;

 

   

the audited consolidated financial statements of Ecolab as of and for the year ended December 31, 2019, the accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, which are included in Ecolab’s Annual Report on Form 10-K for the year ended December 31, 2019 incorporated by reference in this prospectus; and

 

   

the audited combined financial statements of ChampionX as of and for the year ended December 31, 2019, the accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of ChampionX”, which are included elsewhere in this prospectus.

The unaudited pro forma condensed consolidated financial statements do not purport to represent the actual consolidated results of operations or financial condition had the Transactions occurred on the dates assumed, nor are they indicative of Ecolab’s future consolidated results of operations or financial condition.

 

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2019

 

(in millions)    Historical
Ecolab
     Removal of
Historical
ChampionX(a)
    Disposition
Adjustments
          Pro Forma
Ecolab
 

Assets

           

Current assets

           

Cash and cash equivalents

   $ 186.4      $ (67.6   $ 564.3       (d), (e)     $ 683.1  

Accounts receivable, net

     2,796.5        (414.6     —           2,381.9  

Inventories

     1,505.6        (424.0     —           1,081.6  

Other current assets

     339.9        (44.7     —           295.2  
  

 

 

    

 

 

   

 

 

     

 

 

 

Total current assets

     4,828.4        (950.9     564.3         4,441.8  

Property, plant and equipment, net

     3,954.9        (756.7     —           3,198.2  

Goodwill

     7,251.7        (1,671.8     (11.2     (f)       5,568.7  

Other intangible assets, net

     3,672.5        (744.8     —           2,927.7  

Operating lease assets

     577.5        (110.9     —           466.6  

Other assets

     584.1        (66.0     (1.6     (g)       516.5  
  

 

 

    

 

 

   

 

 

     

 

 

 

Total asset

   $ 20,869.1      $ (4,301.1   $ 551.5       $ 17,119.5  
  

 

 

    

 

 

   

 

 

     

 

 

 

Liabilities and equity

           

Current liabilities

           

Short-term debt

   $ 380.6      $ (0.1   $ —         $ 380.5  

Accounts payable

     1,284.3        (187.0     —           1,097.3  

Compensation and benefits

     599.5        (33.8     —           565.7  

Income taxes

     142.8        (5.9     —           136.9  

Other current liabilities

     1,223.4        (105.1     (30.6     (b), (h)       1,087.7  
  

 

 

    

 

 

   

 

 

     

 

 

 

Total current liabilities

     3,630.6        (331.9     (30.6       3,268.1  

Long-term debt

     5,973.5        (0.3     —           5,973.2  

Postretirement health care and pension benefits

     1,088.0        (3.6     (1.1     (i)       1,083.3  

Deferred income taxes

     740.4        (203.0     (4.7     (g)       532.7  

Operating lease liabilities

     425.2        (79.2     —           346.0  

Other liabilities

     285.6        (18.9     3.4       (g)       270.1  
  

 

 

    

 

 

   

 

 

     

 

 

 

Total liabilities

     12,143.3        (636.9     (33.0       11,473.4  

Equity

           

Total Ecolab shareholders’ equity

     8,685.3        (3,662.0     568.0       (j     5,591.3  

Noncontrolling interest

     40.5        (2.2     16.5       (c     54.8  
  

 

 

    

 

 

   

 

 

     

 

 

 

Total equity

     8,725.8        (3,664.2     584.5         5,646.1