Business Acquisitions and Dispositions

9 Months Ended

Sep. 30, 2011

Business Acquisitions and Dispositions

Business Acquisitions and Dispositions

7.       Business Acquisitions and Dispositions

2011 Activity

In July 2011, the company entered into an agreement and plan of merger with Nalco Holding Company, under which Nalco will be merged with a subsidiary of the company. Based in Naperville, Illinois, Nalco is the world’s leading water treatment and process improvement company, offering water management sustainability services focused on industrial, energy and institutional market segments. Nalco sales were $4.3 billion in 2010. Subject to the terms of the merger agreement entered into on July 19, 2011, the company will issue approximately 68.3 million shares of Ecolab stock and pay approximately $1.6 billion in cash to Nalco shareholders. This represents a fully-diluted offer value for Nalco’s equity of $5.3 billion and, inclusive of $2.7 billion in Nalco net debt, a total transaction value of $8.0 billion, based on the company’s closing stock price on August 29, 2011, which is consistent with the company’s Form S-4 filing, as discussed below.

The company expects the transaction to close in the fourth quarter, subject to customary closing conditions, regulatory clearances, as well as approval of both the company’s and Nalco’s shareholders. The company filed with the SEC a registration statement on Form S-4 (commission file number 333-176601) that includes a joint proxy statement of the company and Nalco and that also constitutes a prospectus of the company with respect to the shares of Ecolab stock to be issued in the merger. The company established a record date of October 11, 2011 and a meeting date of November 30, 2011, for the special meeting of stockholders to approve the issuance of company stock in the merger. Nalco has set concurrent record and meeting dates for its special stockholder meeting to approve the merger.

The company and Nalco have submitted notifications with competition authorities in the U.S., European Union, Australia, Canada, China, Columbia, Mexico, Russia, South Korea and Turkey. The company has received clearances without imposed conditions from the U.S., Australia, Canada, Mexico, Russia, South Korea and Turkey. The company expects to obtain all required regulatory clearances to enable the transaction to close in the fourth quarter.

In March 2011, the company closed on the purchase of the assets of O.R. Solutions, Inc., a privately-held developer and marketer of surgical fluid warming and cooling systems in the U.S. The total purchase price was approximately $260 million, of which $26 million remains payable and was placed in an escrow for indemnification purposes related to general representations and warranties. The business, which has annual sales of approximately $55 million, became part of the company’s U.S. Cleaning & Sanitizing segment during the first quarter of 2011.

In December 2010, subsequent to the company’s fiscal year end for international operations, the company completed the purchase of the assets of Cleantec located in Brisbane, Queensland, Australia. Cleantec is a developer, manufacturer and marketer of cleaning and hygiene products principally within the Australian food and beverage processing, foodservice, hospitality and textile care markets. The total purchase price was approximately $43 million, of which $2 million remains payable and was placed in an escrow for indemnification purposes. The business, which has annual sales of approximately $55 million, became part of the company’s International segment during the first quarter of 2011.

2010 Activity

In September 2010, the company acquired the commercial laundry division of Dober Chemical Corp. The acquisition strengthened the company’s U.S. and Canada Textile Care business by adding customer relationships and business scale, as well as important customer technology.

During the third quarter of 2010, the company sold an investment in a small U.S. business and recognized a gain of $5.9 million. The investment was not material to the company’s consolidated results of operations or financial position.

During the second quarter of 2010, the company made an earnout payment related to a previous acquisition and sold a small joint venture in its international segment. The impact of this divestiture was not material.

Completed acquisitions in 2011 and 2010 were not material to the company’s consolidated financial statements; therefore pro forma financial information is not presented. The aggregate purchase price of acquisitions has been reduced for any cash or cash equivalents acquired with the acquisitions.

Based upon purchase price allocations, the components of the aggregate purchase prices of 2011 and 2010 acquisitions are shown in the table below. The contingent consideration in 2011 relates to an immaterial acquisition completed during the second quarter.

	Third Quarter Ended September 30					Nine Months Ended September 30
(millions)	2011		2010			2011			2010
Net tangible assets acquired	$	—	$	7.6		$	57.4		$	7.6
Identifiable intangible assets
Customer relationships	0.2		12.3			144.9			12.3
Trademarks	—		0.8			11.2			0.8
Patents	—		—			0.3			—
Other intangibles	—		6.2			8.4			6.2
Total	0.2		19.3			164.8			19.3
Goodwill	0.6		14.1			92.5			14.8
Total aggregate purchase price	0.8		41.0			314.7			41.7
Contingent consideration	—		—			(4.7		)	—
Liability for indemnification	—		(2.1		)	(28.1		)	(2.1		)
Net cash paid for acquisitions	$	0.8	$	38.9		$	281.9		$	39.6

The weighted average useful life of identifiable intangible assets acquired during the first nine months of 2011 and 2010 were 14 and 10 years, respectively.