Water technology firm predicts big returns, cost savings
Water technology firm Xylem, dedicated to solving the world's most challenging water issues, announced yesterday it signed a definitive deal to acquire smart grid and AMI firm Sensus for about $1.7 billion in cash. Sensus 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, Xylem said.
Sensus has over 80 million metering devices installed globally and its distinctive FlexNet communications network technology uses licensed spectrum in the US and other geographies, it added, offering secure connectivity solutions that support multiple applications. The smart grid firm generated $837 million in adjusted revenue and $159 million in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in fiscal 2016, which ended March 31, 2016, Xylem said.
The $1.7 billion cash purchase price is 10.7 times Sensus' fiscal year 2016 adjusted EBITDA, it added.
QUOTABLE: 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. This will be an important milestone in our strategy to move Xylem's portfolio of solutions up the technology curve. – Xylem CEO Patrick Decker in prepared remarks
"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 Xylem CEO Patrick Decker in prepared remarks.
"Sensus has a very broad product portfolio in metering and is well positioned in the advanced metering infrastructure segment. 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," he added.
"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," Decker said.
The move will advance an innovation strategy Xylem outlined at its investor day last year – combining the advanced technology and R&D expertise and capabilities of both firms, he added. "We anticipate accelerating our delivery of innovative solutions to our customers, particularly in the area of advanced analytics across the water, wastewater and outdoor water sectors.
"Sensus' network platform, FlexNet, can support many of Xylem's connected product offerings and enable expansion into adjacent internet-of-things markets. We also see natural opportunities to extend the company's advanced data analytics platform which provides actionable insights for customers, to Xylem products," Decker said.
"Both platforms provide a powerful foundation for future organic and inorganic growth opportunities."
Sensus generates about 24% of its revenues from sales to electric and gas utilities, Xylem said. The projected growth rate of smart metering, particularly AMI, is even higher in these sectors than in water and Sensus is well positioned to capture that growth with its network-enabled solutions, it added.
"Xylem is a highly respected company," said Randy Bays, president of Sensus, in prepared remarks, "and we are confident that, together, we will have the resources and scale to continue advancing differentiated technology and delivering innovative solutions to our customers around the world. We look forward to working with the Xylem team to ensure a smooth transition and completing the combination as quickly as possible."
Sensus has about 3,300 employees and major locations in the US, UK, Germany, Slovakia and China, Xylem said, and nearly 70% of 2016 revenues were generated in the US.
Xylem will finance the all-cash transaction with the deployment of about $400 million of Xylem's non-US cash, new and existing credit facilities and a combination of short- and long-term debt, it added. The transaction is subject to customary closing conditions and regulatory review, including approval by the Federal Communications Commission of the transfer of certain spectrum licenses.
The transaction is expected to close in Q4.Source : http://www.smartgridtoday.com/members/Xylem-joins-smart-grid-world-by-acquiring-Sensus.cfm?utm_source=Real%20Magnet&utm_medium=Email&utm_campaign=101464854
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