01—Abstract
Summary
Summary of the 8-K filed December 23, 2019. Cited figures are marked; the original filing is the authoritative source.
Ecolab Inc. announced a significant strategic transaction via an 8-K filing on December 23, 2019, detailing a Reverse Morris Trust transaction.
The company's upstream energy business, to be housed in a subsidiary named ChampionX Holding Inc. ("Newco"), will merge with Apergy Corporation. This transaction involves a spin-off of Newco to Ecolab stockholders, followed by a merger of Newco with Apergy. Ecolab stockholders are expected to own 62%a of the combined entity, with existing Apergy stockholders owning the remaining 38% on a fully diluted basis.
The primary goal of this transaction is to separate Ecolab's upstream energy segment, allowing Ecolab to focus on its core cleaning, sanitization, and water management solutions. The separation is structured to be tax-free to Ecolab's stockholders, except for any cash received in lieu of fractional shares. The transaction is subject to customary closing conditions, including regulatory approvals and shareholder votes, and has an anticipated termination date of September 20, 2020.
02—Key points
Key Highlights
- Ecolab Inc. is combining its upstream energy business with Apergy Corporation through a Reverse Morris Trust transaction.
- Ecolab's upstream energy business will be spun off into a new subsidiary, ChampionX Holding Inc. ("Newco"), which will then merge with Apergy.
- Following the merger, Ecolab stockholders are expected to hold 62% of the combined company, with Apergy stockholders holding 38%.
- The transaction is designed to be tax-free to Ecolab stockholders, excluding any cash received for fractional shares.
- The combined entity will be focused on the energy sector, allowing Ecolab to concentrate on its core water, hygiene, and infection prevention solutions.
- The agreement includes provisions for mutual termination rights and potential termination fees for Apergy under specific circumstances.
- Various ancillary agreements, including IP, employee, transition services, and tax matters agreements, have been or will be executed to govern the post-separation relationship.
03—Questions
Frequently Asked Questions
What is the main purpose of this transaction for Ecolab?
The main purpose for Ecolab is to separate its upstream energy business, allowing the company to focus its resources and strategic efforts on its core businesses related to water, hygiene, and infection prevention solutions, which are more aligned with its long-term growth strategy.
How will Ecolab stockholders benefit from this transaction?
Ecolab stockholders are expected to receive shares of the newly formed combined entity (Ecolab's spun-off energy business merged with Apergy), giving them a significant ownership stake (62%) in the combined energy-focused company. Additionally, the transaction is structured to be tax-free for Ecolab's stockholders, except for any cash received for fractional shares.
What are the key conditions for this transaction to close?
The consummation of the merger is subject to several conditions, including the completion of the reorganization and distribution of Newco shares, the effectiveness of Apergy's registration statement for the new shares, approval of the stock issuance by Apergy's stockholders, expiration of antitrust waiting periods (like Hart-Scott-Rodino), and receipt of tax-free opinions. Both parties must also fulfill their representations, warranties, and covenants.
What is the expected financial impact of the separation on Ecolab?
As part of the separation, Newco will make a cash distribution to Ecolab of $525 million, plus an amount for certain taxes paid by Ecolab, capped at $12 million. This cash infusion can be used by Ecolab for its strategic initiatives or returned to shareholders. The transaction also removes the volatility and distinct market dynamics of the upstream energy business from Ecolab's financial profile.
04—Continue