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TheStreet Open House

Zep Inc. Completes Acquisition Of Ecolab’s Vehicle Care Division

Zep Inc. (NYSE: ZEP), a leading producer and marketer of a wide range of cleaning and maintenance solutions, today announced that a wholly owned subsidiary of Zep Inc. completed the purchase of the Vehicle Care division of Ecolab Inc. (NYSE: ECL), effective December 1, 2012 for approximately $120 million.

The combination of Ecolab's Vehicle Care division with Zep's existing North American Sales and Service vehicle-wash operations and its Niagara and Washtronics fleet-wash operations creates a new platform, "Zep Vehicle Care," representing approximately 13% of Zep’s net sales on a pro forma basis.

“The creation of Zep Vehicle Care is an example of our disciplined focus on key markets, like transportation, where we bring unique value and expertise to our customers,” said John K. Morgan, Chairman, President and Chief Executive Officer of Zep Inc. “We expect the combination of our respective sales organizations with best-in-class vehicle care solutions will allow us to capitalize on growth opportunities in the $1 billion U.S. vehicle care marketplace in a way that is accretive to earnings. Furthermore, the attractive cash flow generation of our overall business will allow us to focus efforts on quickly reducing debt in a meaningful way.”

The Zep Vehicle Care portfolio of brands comprised of Blue Coral®, Black Magic®, Rain-X®, Zep® Enviroedge™, Niagara National™, Washtronics™ & Armor All Professional™ includes soaps, polishes, sealants & protectants, detail products, wheel and tire treatments, air fresheners and related equipment.

Zep Vehicle Care will offer its products and services through a world-class team of service and support professionals to provide car, truck and fleet wash operators with high efficacy products for their wash tunnels and retail operations.

Zep Inc. financed the acquisition using existing debt capacity. While both the interest rate and leverage ratio are very manageable, the company will immediately turn much of its focus to deleveraging its balance sheet, thereby preparing for additional expansion in the long term. The Company will incur acquisition-related costs associated with advisory, legal and other due diligence-related services and transition costs during its first and second quarters of fiscal 2013. In addition, the Company entered into a transition services agreement under which Ecolab will continue to provide certain services to the acquired Vehicle Care business for up to 12 months. Despite these first year acquisition and related costs, the Company anticipates this transaction will be modestly accretive to earnings in fiscal 2013. Once integration activities are complete, the Company anticipates realizing additional synergies ranging between $1.5 million and $2.0 million annually.

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