IHS Chemical Week

CHEM IDEAS

Chemical Finance Digest, Nov. 28-Dec. 2

3:50 PM MST | December 5, 2011 | By VINCENT VALK



Topping the headlines last week, Ecolab and Nalco closed their $8.3-billion merger, which values Nalco at $38.80/share. Ecolab will issue 68.3 million new shares to fund part of the acquisition, which includes $2.7 billion in assumed debt. The newly-combined entity expects EPS to grow 15% in 2012 and 2013.

In other M&A news, Australian agchems firm Nufarm has acquired Seeds 2000, a U.S. sunflower seeds concern, for $55.2 million. The deal is part of a Nufarm’s ongoing expansion of its international activities. Meanwhile, Royal Adhesives & Sealants has purchased an adhesives coatings firm, and Koch Industries subsidiary Flint Hills Resources has bought a mothballed Nebraska biodiesel plant at a heavy discount.

In debt news, Ecolab’s corporate credit rating has been lowered in the aftermath of the Nalco acquisition. Moody’s has downgraded Ecolab two notches, to ‘Baa1,’ as the company assumes Nalco’s debt and issues new commercial paper to fund the deal. However, “we expect the company to significantly reduce leverage in 2012 and 2013 through a combination of profitability growth and debt repayments," says Moody’s v.p. and senior credit officer William Reed. S&P has also downloaded Ecolab two notches, to ‘BBB+’ from ‘A.’

In macroeconomic news, the unemployment rate in the U.S. fell to 8.6%, the lowest figure since March 2009, in November’s jobs report. The economy added 120,000 jobs, representing steady growth that met expectations. The large unemployment rate drop was – yet again – partially due to a reduction in the size of the labor force, this time by some 315,000 people. Still, “The big picture shows an economy that has picked up steam in the second half of the year. We expect 2.6% GDP growth in the fourth quarter. We do expect the pace to slow in the first quarter (to 1.7%), since the economy still faces domestic headwinds (from the legacy of household and government debt),” says IHS Global Insight economist Nigel Gault.














 
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