Food safety specialist Ecolab has outlined expected restructuring costs of nearly $500m stemming from its $8.3bn acquisition of Nalco Holdings in December 2011.
According to the US-based giant, costs to 2013 in relation to the Nalco takeover are expected to hit $180m - with other charges taking the overall total to $480m.
However, the firm also forecasts that some 2,000 job will also be cut – accounting for over 5% of its current workforce.
Overall charges in relation to the merger, which include restructuring and special charges such as integration, modification and severance costs, will see $100m paid out in Q4 2011 alone.
A further $230m is expected to be paid out in 2012, and $150m in 2013, the company forecasts.
The $8.3bn takeover of Nalco in December 2011, which saw Ecolab almost double its workforce to 38,000 and annual sales to $11bn, came as part of a strategy to tap into trends such as food safety and the need for industry to maximise operational efficiencies such as energy and water reduction.
Almost 69m shares were issued and $1.6bn paid to Nalco shareholders to meet the company’s $5.6bn valuation. Ecolab also took on $2.7bn debt owned by the company.
The Nalco-related restructuring efforts, which Ecolab hope will strengthen its global business, are expected to be completed by the end of 2013.
Through the measures, the company expects on-going annual synergy cost savings to increase from $150m to $250m by the end of 2014.
The company has increased its cost synergy target, for 2012 alone, to $75m from an original forecast of $35m, the report added.
The company measures, which will include the loss of around 500 workers, will strengthen its global business, the report said.
It added that it is likely that some plants and distribution centres will close – eliminating around 1,500 future jobs.
Improve efficiency and effectiveness
“We are making excellent progress in our work to integrate our business. Our teams have come together quickly. Our similar business approach and cultures have made the merger process very smooth and productive, and our work to develop synergies has developed better than expected, resulting in our higher cost synergies forecast,” said Ecolab CEO Douglas M. Baker.
“The restructuring and special charges we announced today are designed to enable us to more quickly realise and increase the merger-related cost synergies and improve the efficiency and effectiveness of our global business.”
“As a result, our outlook remains strong. 2011 adjusted EPS results are expected to show 14% growth and be in the middle of our forecasted range, and our 2012 adjusted EPS outlook is for even stronger growth of 16% to 20%,” he added.