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Nalco Holding Company

Robbins Umeda LLP Announces an Investigation of Nalco Holding Company

Robbins Umeda LLP, a shareholder rights litigation firm has commenced an investigation into possible breaches of fiduciary duty and other violations of state law by members of the board of directors of Nalco Holding Company (NYSE: NLC) in connection with their efforts to sell the company to Ecolab, Inc. (NYSE: ECL).

On July 20, 2011, Nalco announced that it had entered into a definitive merger agreement with Ecolab under which Ecolab will acquire all outstanding shares of the company in a cash and stock transaction.  Pursuant to the terms of the agreement, Nalco shareholders will receive either $38.80 or 0.7005 shares of Ecolab for each share of Nalco they own.  The transaction is expected to close in the fourth quarter of 2011.

Robbins Umeda LLP’s investigation focuses on whether Nalco’s board is undertaking a fair process to obtain maximum value and adequately compensate shareholders in light of the company’s recent positive financial results.  As part of the merger announcement, Nalco released preliminary results for the second quarter of fiscal year 2011.  The company reported a record $1.2 billion in sales for the quarter, a 16% increase over the same quarter in the prior year, and above analyst estimates of $1.13 billion.  Additionally, the company reported an adjusted EPS of $0.47, compared to $0.41 from the same period of the prior year, and above analyst estimates of only $0.36.  Moreover, analysts have recently released target prices for Nalco that value the company’s stock at $39.00 per share, considerably higher than the offer price that forms the basis of the merger agreement. 

In addition, the firm is investigating whether self-dealing and other employment guarantees played a part in the decision by the board to enter into the agreement with Ecolab.  Upon closure, three Nalco directors are slated to receive positions on Ecolab’s board. 

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