LONDON (CNNfn) - French utility giant Suez Lyonnaise des Eaux announced the $4.1 billion acquisition of Chicago-based chemical firm Nalco Monday in a deal which confirms its position as the world's largest water services company.
Suez Lyonnaise's cash offer consolidates its position in the U.S. water market after the company expanded aggressively in Asia, Latin America and deregulated European markets such as the United Kingdom. It paid $425 million earlier this month for Calgon, the U.S.-based number three water treatment firm.
The French group is offering $53 a Nalco share in cash, a 24 percent premium over Nalco's (NLC) Friday close. It will launch a tender offer for all of Nalco's common shares by the end of the week. Nalco's board has recommended the offer to shareholders.
The deal confirms Suez as the world's largest provider of water treatment services following the acquisition of Nalco, the current global number one. The combined group will have assets of $7.4 billion in the water sector alone, alongside its energy and waste management businesses. It will base its global water treatment base in Chicago.
Nalco has operations in 12 countries and 1999 revenue is forecast to be $1.94 billion. Suez had sales in 1998 of over $37 billion.
Suez said the deal will boosts its cash flow and will add to earnings from the second year. It is targeting $100 million in cost savings from combining the groups' operations. It will fund half the deal from existing funds and the balance from fresh borrowing.
Suez shares closed Friday at 162.2 euros, a fall of 1 euro.