Arad Group, an Israeli developer of water meters, is in advanced talks to acquire a majority stake in a Mexican water company to expand in Latin America’s second largest economy, Chairman Hugo R. Chaufan said in an interview.
Arad, which gets about 80 percent of sales outside its home market, is nearing an agreement to buy more than 50 percent of a water-measuring company for its first purchase in Mexico, Chaufan said in Madrid. He declined to name the company because the talks are continuing and private.
“We are in the final steps of making our next acquisition, which is going to be in Mexico,” Chaufan said yesterday. An agreement valued at about $10 million may be reached as early as the first quarter of 2014, he said.
“We already sell products there but if we succeed, it will be our first company in Mexico, which is a very interesting market,” Chaufan said. “They have very good technologies and we’ve known them for many years.”
Arad is focusing on installing electronic water meters to raise consumer efficiencies and win share from competitors such as Itron Inc., the Liberty Lake, Washington-based maker of smart meters that reduce waste and energy, and Badger Meter Inc., a U.S. maker of fluid-control devices.
Besides seeking growth in emerging markets, Arad plans to boost its presence through purchases in western European countries such as France and Germany, Chaufan said. Those acquisitions may be valued at as much as $90 million, he said.
“Once we find the right the company to be acquired, we can go ahead very, very fast,” Chaufan said, adding that price isn’t a huge concern as Arad’s debt is low.
Founded in 1941, Arad is in markets such as the U.S., the U.K., China, Spain, India, Brazil and Russia. Its main customers are water utilities, Chaufan said.
“The U.S. market continues being our most important market,” with Arad generating more than half its sales there, he said. “It’s a very challenging market.”
Lack of water is one of the main concerns for governments and people worldwide as water supply remains at constant levels while demand is increasing, Chaufan said.
Arad is betting on devices such as its Octave Ultrasonic Bulk meter and AMR/AMI Dialog3G systems to reduce the loss of water. The company is also developing a fixed 4G water system already installed as a pilot in the U.S. that Chaufan believes will be the next big water-metering thing.
“The amount of water being lost is so big and the resource is so important that countries are reaching the conclusion it’s very important to work with this resource in a more efficient way,” Chaufan said. “This water scarcity represents growth opportunities for Arad.”