Ecolab sells surgical business for nearly $1 billion

Ecolab is selling its surgical solutions business to Medline Industries for just under $1 billion.

The St. Paul-based provider of water, hygiene and infection prevention solutions and services announced the $950 million deal with the Illinois-based private company Tuesday morning. Medline is one of the largest makers and distributors of medical supplies and has 38,000 employees with about $28 billion in annual sales.

“We are pleased to have the opportunity to acquire a leading portfolio of operating room products with such a strong reputation for protecting patients and health care workers,” said Medline President Jim Pigott in a news release.

Ecolab’s surgical solutions business includes sterile drapes that protect patients, surgeons and operating room equipment. It is a product-driven business that produced more than $400 million in sales in 2023. About 3,500 Ecolab employees, most of them in the Dominican Republic, will become part of Medline.

“It’s a great business that’s going to be in great hands with Medline,” said Ecolab CEO Christophe Beck. “I really wanted to find a partner who would take care of our team going forward and Medline was the best possible partner we could find.”

The move will allow Ecolab to concentrate on its service-driven businesses in health care and life sciences areas, including a service-driven, instrument-reprocessing business in the health care segment for cleaning and sterilizing medical tools and equipment.

“This is a typical Ecolab business, which is where we want to focus our investments, our attention, our research as well as our customers in the future,” Beck said.

The sale should close in the second half of 2024.

Ecolab earned $412.1 million, or $1.43 a share, on revenue that grew 5% to $3.8 billion in the first quarter. Earnings per share increased 74% and adjusted earnings per share of $1.34 grew 52% to match analysts’ expectations. The company also raised its guidance for the remainder of 2024 and now expects its adjusted earnings per share for the year to be in the range of $6.40 to $6.70, which would represent growth of 23% to 29% from 2023.

Ecolab began reporting its results in four segments: global industrial; global institutional and specialty; global health care and life sciences; and the newly formed global pest elimination. Ecolab has been in the pest elimination business for a long time, but most recently reported its results in the “other” category with some smaller businesses.

The pest business recently passed $1 billion in annual revenue with strong growth rates and profit margins. The billion-dollar milestone was a good opportunity for it to receive more attention by becoming a standalone reporting segment.

“This is the best-performing pest elimination business in the world, so it deserves to have its own focus.” Beck said.

The global pest business now becomes part of the company’s executive committee and will report to Darrell Brown, Ecolab’s president, along with the other segments. This change will also help investors have a cleaner look into how the segment is performing. It had the second-best revenue growth of the quarter, with revenue of $266.8 million, up 9% from the first quarter of last year with a stronger operating income margin than the other segments.

Shares of Ecolab closed Tuesday at $226.15, up 2%. Over the last 52 weeks, shares have ranged between $156.72 and $231.86 a share.