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Xylem May Spend Up to $500 Million on 2013 Acquisiitions

Xylem (XYL) Inc., the water equipment and service provider spun off from ITT Corp. (ITT), may spend $300 million to $500 million on 2013 acquisitions to expand, or double this year’s target, the company said.

“We’ve been able to do one small acquisition. At this point in time, I would have like to have had more but the pipeline is robust,” Chief Executive Officer Gretchen McClain said. Xylem had a 2012 purchase target of $150 million to $200 million. That may reach $500 million next year, its finance chief Michael Speetzen said today at a Boston conference.

As water and sewer systems age in developed markets like the U.S. and Europe, about 80 percent of budgets are directed to critical repairs and upgrades to make systems more efficient, up from about 70 percent, she said. The White Plains, N.Y.-based company gets 36 percent of its revenue from public utilities.

Utility contracts for infrastructure upgrades are funded via mandatory tariffs and fees, unlike municipal capital expenditure budgets that can be delayed and are more discretionary. U.S. tariffs for water and sewer services are rising about 8 percent annually, and Europe even more, she said.

Xylem in July agreed to acquire closely held MJK Automation A/S, a maker of flow and level sensors, for $12.3 million. Its shares rose 0.9 percent to $25.93 at 1:05 p.m. in New York Stock Exchange trading, almost unchanged for the year.

To contact the reporter on this story: Rachel Layne in Boston at rlayne@bloomberg.net

To contact the editor responsible for this story: Brad Skillman at bskillman1@bloomberg.net

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