Apergy Corp.(The Woodlands, Tex.; www.apergy.com) and Ecolab Inc. (St. Paul, Minn.; www.ecolab.com) announced that their Boards of Directors have approved a definitive agreement pursuant to which Ecolab will separate the Upstream Energy business of Nalco Champion (which is being renamed ChampionX) and simultaneously combine it with Apergy in a tax-free transaction, creating a scaled, global leader in production-optimization solutions.
The merger combines Apergy with Ecolab’s ChampionX business, which is expected to generate approximately $2.4 billion in revenue in 2019, and consists of the drilling, completion, and energy production, chemistry sciences, and solutions operations currently included within Ecolab’s Energy segment. The downstream chemistry solutions business from Ecolab’s former Energy segment will be retained by Ecolab. Following the completion of the transaction, the Combined Company will have approximately $3.5 billion in pro forma 2019 sales, with a strong balance sheet and robust free cash flow generation. The Combined Company will provide greater scale, a larger geographic footprint, enhanced customer touch points, and low leverage supported by strong cash flow generation through the oil and gas cycle.
“This transaction is a great development benefiting both Apergy and Ecolab shareholders. It brings together two well respected companies to create a global leader that provides customers with a full suite of production-optimization solutions, solidifying our position as a focused leader in the production segment, while providing shareholders and employees better long term growth opportunities” said Sivasankaran “Soma” Somasundaram, President and Chief Executive Officer of Apergy.
Douglas M. Baker, Jr., Ecolab’s Chairman and CEO, commented, “This transaction is a terrific development for both Apergy and ChampionX. It brings together two established industry leaders, creating a strong and focused entity with an experienced management team, considerable scale and a broader range of solutions that better serve customer needs. These commercial merits, together with the significant synergies expected to be realized through the combination, should drive even more attractive shareholder value for Ecolab shareholders than our original spin plan. This combination should also create more opportunities for our ChampionX associates, whom we thank for their many contributions and wish them every success in the future. Given that we have already been working towards a spinoff of ChampionX, we expect this to be a smooth transition for the business.”
Deric Bryant, current Executive Vice President & President of Ecolab’s Upstream Energy business, commented, “I am excited to be joining with Apergy to drive ChampionX’s future growth. Together our two businesses will offer a compelling value proposition to our production-focused customer base. I believe that our future is brighter together, and I look forward to leading ChampionX as part of the Combined Company.”
Based on Apergy’s closing price of $30.67 on December 18, 2019, the transaction values Ecolab’s ChampionX business at $4.4 billion.
The transaction is expected to be completed by the end of the second quarter of 2020.