Zep Inc. (ZEP) Finalizes Acquisition of Ecolab's (ECL) Vehicle Care Division

December 3, 2012 8:10 AM EST
Zep Inc. (NYSE: ZEP) today announced that a wholly owned subsidiary of Zep Inc. completed the purchase of the Vehicle Care division of Ecolab Inc. (NYSE: ECL), effective December 1, 2012 for approximately $120 million.

The combination of Ecolab's Vehicle Care division with Zep's existing North American Sales and Service vehicle-wash operations and its Niagara and Washtronics fleet-wash operations creates a new platform, "Zep Vehicle Care," representing approximately 13% of Zep’s net sales on a pro forma basis.

Zep Inc. financed the acquisition using existing debt capacity. While both the interest rate and leverage ratio are very manageable, the company will immediately turn much of its focus to deleveraging its balance sheet, thereby preparing for additional expansion in the long term. The Company will incur acquisition-related costs associated with advisory, legal and other due diligence-related services and transition costs during its first and second quarters of fiscal 2013. In addition, the Company entered into a transition services agreement under which Ecolab will continue to provide certain services to the acquired Vehicle Care business for up to 12 months. Despite these first year acquisition and related costs, the Company anticipates this transaction will be modestly accretive to earnings in fiscal 2013. Once integration activities are complete, the Company anticipates realizing additional synergies ranging between $1.5 million and $2.0 million annually.

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