Apergy merges with Ecolab’s upstream energy business in $3.9bn deal

March 2020 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

March 2020 Issue

In a combination which creates a global leader in production-optimisation solutions, Apergy Corporation is to merge with Ecolab’s upstream energy business in a transaction valued at $3.9bn.

Under the terms of the definitive agreement, Ecolab will separate the business – renaming it from Nalco Champion to ChampionX – and simultaneously combine it with Apergy in a tax-free transaction. The boards of directors of both companies have approved the transaction.

Furthermore, 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,” said Sivasankaran Somasundaram, president and chief executive of Apergy. “It brings together two well respected companies to create a global leader that provides customers with a full suite of production-optimisation solutions, solidifying our position as a focused leader in the production segment, while providing shareholders and employees better long-term growth opportunities.

“The ChampionX business is a ‘top box’ performer within our value creation framework and will accelerate our strategic goals of broadening our product portfolio and geographic footprint, as well as expanding our customer relationships,” he added. “The transaction is consistent with our strategic priorities of reducing cyclicality and decreasing leverage. Additionally, the combined company will be on the cutting edge of technology and development in the oilfield with a patent portfolio of over 2400 global patents.”

A leading provider of highly engineered equipment and technologies that help companies drill for and produce oil and gas safely and efficiently around the world, Apergy’s products provide efficient functioning throughout the lifecycle of a well – from drilling to completion to production.

Complementing Apergy is Ecolab – a global leader in water, hygiene and energy technologies and services that protect people and vital resources. Ecolab delivers comprehensive solutions, data-driven insights and on-site service to promote safe food, maintain clean environments, optimise water and energy use, and improve operational efficiencies for customers in the food, healthcare, energy, hospitality and industrial markets in more than 170 countries around the world.

The combined company will be headquartered in Texas and will have operations in over 55 countries.

“This transaction creates a strong and focused entity with an experienced management team, considerable scale and a broader range of solutions that better serve customer needs,” said Douglas M. Baker, Jr, chairman and chief executive of Ecolab. “Commercial merits, together with the significant synergies expected to be realised through the combination, should drive even more attractive shareholder value for Ecolab shareholders.”

Following completion of the transaction – which is expected by the end of the second quarter of 2020 – Apergy and Ecolab shareholders will own 38 and 62 percent of the combined entity, respectively.

Serving as financial advisers to Apergy is Centerview Partners LLC and Lazard, with Weil, Gotshal & Manges LLP serving as legal counsel. BofA Securities is serving as exclusive financial adviser to Ecolab, with Skadden, Arps, Slate, Meagher & Flom LLP serving as legal counsel.

Deric Bryant, current executive vice president and president of ChampionX, concluded: “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.”

Fraser Tennant