Xylem Agrees to Acquire Sensus

"This will be an important milestone in our strategy to move Xylem's portfolio of solutions up the technology curve. The combination of Xylem's world-class brands and products with Sensus' leading-edge smart technologies will create a differentiated offering that will better meet our customers' evolving needs, including greater energy efficiency, water conservation, and improved life-cycle costs," said Patrick Decker, Xylem's president and CEO.

Water technology company Xylem Inc. announced Aug. 15 it has signed a definitive agreement to acquire privately held Sensus for approximately $1.7 billion in cash. Sensus, based in Raleigh, N.C., is owned by investment funds affiliated with The Jordan Company and GS Capital Partners 2000 and is a leading provider of smart meters, network technologies, and advanced data analytics services for the water, electric, and gas industries, with more than 80 million metering devices installed globally, according to both companies. Xylem is based in Rye Brook, N.Y.

Sensus generated $837 million in adjusted revenue and $159 million in adjusted earnings before interest, taxes, depreciation and amortization in fiscal 2016; Xylem's announcement said it expects to achieve at least $50 million in annual cost synergies to be substantially realized within three years of closing the acquisition, and the transaction is expected to be accretive to Xylem's adjusted earnings in 2017.

"With Sensus, we will acquire a strategically valuable asset that will accelerate our ability to bring systems intelligence solutions to customers across the water and energy industries, establish a foundation for future growth, and create significant shareholder value," said Patrick Decker, Xylem's president and CEO. "This will be an important milestone in our strategy to move Xylem's portfolio of solutions up the technology curve. The combination of Xylem's world-class brands and products with Sensus' leading-edge smart technologies will create a differentiated offering that will better meet our customers' evolving needs, including greater energy efficiency, water conservation, and improved life-cycle costs.

"Sensus has a very broad product portfolio in metering and is well positioned in the advanced metering infrastructure segment," he added. "The AMI segment is growing at nearly twice the rate of the total metering space, driven in part by regulations and customers' growing need for real-time data and reduced operational costs. Our expansive customer relationships will be able to extend the reach of Sensus' products and technologies to new markets globally, particularly in emerging markets. As a combined company, we expect Xylem to grow faster and be more profitable."

John Quealy, an analyst with Canaccord Genuity Inc. who covers environmental technologies, called the acquisition "a bold strategic move" in his Aug. 15 research report provided by Canaccord Genuity Inc., which is a U.S. broker-dealer with principal offices located in Boston, New York, San Francisco, and Houston. "At first glance we like the fit, as Sensus looks to serve as an R&D 'springboard' into broader systems intelligence capabilities," he wrote. (The recommendations and opinions in the report accurately reflect the research analyst's personal, independent, and objective views about any and all companies that are the subject of the report, the report notes.)

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