Ecolab Inc. (St. Paul, Minn.; www.ecolab.com) has announced plans to spin off its Upstream energy businesses as a standalone publicly-traded company. The Upstream Energy business currently operates within Ecolab’s Energy segment and consists of the Oil Field Chemicals production business and the WellChem drilling and well completion chemistry business. Ecolab plans to retain the Downstream business, which serves refineries and petrochemical plants. The separation transaction is expected to be a tax-free spin-off to U.S. shareholders for U.S. federal income tax purposes.
Upon completion of the spin-off, the Upstream Energy business, with 2018 sales of approximately $2.4 billion, will be a market-leading pure-play global provider of oil and gas production, drilling, and completion product and service solutions, serving the flow maximization and asset protection needs of customers for onshore and offshore activity in even the most challenging of environments.
Douglas M. Baker, Jr., Ecolab’s chairman and chief executive officer, said, “Upstream Energy is an excellent business, but one with a business model that has become increasingly different from our other Ecolab businesses. As unconventional onshore has grown, our two upstream businesses have become more aligned and appropriately evolved into more specialty chemical type businesses which require increasingly different operating disciplines and expertise.
“The spin-off creates a new company singularly focused on the upstream oil and gas markets. As a stand-alone public company, we believe the business will be a more focused and attractive pure play for its customer and investor base given its strong value proposition, ability to pursue a focused energy services strategy and ability to deliver a strong financial performance.”
The leadership and company name will be finalized as the separation process progresses.
Ecolab will continue to focus on its core platforms, which serve the hygiene, food safety and industrial water markets, and will be well-positioned to drive further strong sales and earnings growth as well as strong free cash flow and accretive returns on capital. Ecolab expects to maintain its current dividend and continue to grow it in the future. Ecolab also expects to maintain A-range credit metrics following the separation of the Upstream Energy business.
Ecolab currently expects that the transaction will be completed by mid-year 2020. Completion of the transaction is subject to certain customary conditions, including, among others, confirmation that the spin-off of Upstream Energy is expected to be tax-free to U.S. shareholders, the effectiveness of appropriate filings with the U.S. Securities and Exchange Commission and final approval by Ecolab’s Board of Directors.