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Energy Recovery Says Water Demand Spurring M&A Interest

Energy Recovery Inc., which supplies equipment to the desalination industry, said it’s a possible takeover target amid booming global water demand.

“There are a lot of industrial concerns that are looking at us,” Chief Executive Officer Tom Rooney said in a telephone interview yesterday, without identifying any prospective buyers. “We don’t really want to be bought out.”

More than 100 desalination projects are being studied worldwide, he said. Based in San Leandro, California, Energy Recovery fits plants built by Spain’s Acciona SA and General Electric Co. with a pressure exchanger that reduces power costs when filtering seawater through membranes to produce tap water. Rooney said the company has more than 90 percent of that market.

The stock jumped 11 percent to $2.87 at the close in New York. Earlier it gained as much as 30 percent, the steepest intraday rise since July 2008.

Before today, the stock had returned 10 percent in the past year compared with an average 21 percent for global peers tracked by Bloomberg, and traded at 1.69 times book value, below the industry average of 3.93.

Third-quarter sales rose to $10.5 million from $4.93 million a year ago, according to data compiled by Bloomberg. A third-quarter net loss of $1.83 million compares with an $11.3 million loss in the same year-ago period.

Desalination equipment orders are forecast to triple over five years to become a $17 billion business, according to forecasts by Global Water Intelligence, an industry consultant.

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