Moody's Investors Service expects to lower Ecolab Inc.'s debt rating once it completes its approximately $5.4 billion acquisition of Nalco Holding Co.
Ecolab, a cleaning and pest-control services company, announced in July that it would buy the Naperville, Ill. water treatment company in part to better position itself in the water management business.
Under terms of the deal, Nalco shareholders will receive either 0.7005 share of Ecolab per Nalco share or $38.80 per share in cash.
In addition to the price being paid for the shares, Ecolab will assume about $2.7 billion of Nalco debt, pushing the value of the overall transaction to about $8.1 billion.
Moody's said Tuesday that it will downgrade Ecolab's senior unsecured rating two notches in investment-grade status to "Baa1" from "A2" and will reduce its short-term rating to "Prime-2" from "Prime-1" if the deal closes and is financed as proposed. The ratings agency plans to give a stable outlook to the St. Paul, Minn. company.
Moody's also expects to upgrade Nalco's senior unsecured debt rating to investment-grade level "Baa2" from a "junk" status of "Ba2."
Shares of Ecolab added 38 cents to $50.15 in afternoon trading, while Nalco's stock gained 36 cents to $35.35.