Xylem to Buy Sensus for $1.7 Billion to Add Meter Services

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  • Sensus products estimated to grow at faster pace than Xylem’s
  • Purchase provides opportunities in gas, eletricity markets

Xylem Inc., a maker of wastewater and water treatment systems, agreed to acquire Sensus for about $1.7 billion to add faster-growing data and metering services to its portfolio.

The deal gives access to Sensus’s more than 80 million smart meters, which serve the gas, electric and water industries, Xylem said in a statement Monday. The companies complement each other geographically: the U.S. accounted for 67 percent of Sensus revenue in its past fiscal year and 41 percent of sales for Rye Brook, New York-based Xylem.

“Sensus also puts Xylem into new end markets, which can provide additional opportunities for future growth,” said Janney Montgomery Scott analyst Michael Gaugler in a research note. Sensus increases offerings in the gas and electric utility markets with its “smart systems” network, which enables utility providers to make distribution more efficient, Xylem said.

The expected long-term growth rate for Sensus is 6 percent to 7 percent, compared with Xylem’s rate of 3 percent to 5 percent, Gaugler said.

Xylem climbed 3.7 percent to $50.24 at 12:31 p.m. in New York after advancing to an intraday record of $50.38. The stock was up 33 percent this year through Friday.

Sensus Results

Sensus, owned by investment funds affiliated with Jordan Co. and GS Capital Partners 2000 LP, generated $837 million in adjusted revenue and $159 million in adjusted earnings before interest, taxes, depreciation and amortization in the fiscal year through March 31, according to the statement. The Raleigh, North Carolina-based company has about 3,300 employees and major locations in the U.S., the U.K., Germany, Slovakia and China.

The all-cash acquisition may add about 10 cents to 12 cents a share to profit next year, Xylem said. The company reported profit of $336 million last year on $3.65 billion in sales. It conducts business in more than 150 countries and had more than 12,500 employees worldwide.

“We see no regulatory hurdles to the transaction, given very limited overlap,” analyst Nathan Jones of Stifel Nicolaus & Co. said in a research note. The acquisition "makes a lot of sense strategically."