Xylem Acquiring Smart Meter Company Sensus for $1.7 Billion

RYE BROOK, N.Y. (Aug. 15, 2016)—Xylem Inc. announced that it has signed a definitive agreement to acquire Sensus for approximately $1.7 billion in cash. Sensus, owned by investment funds affiliated with The Jordan Company and GS Capital Partners 2000, is a leading provider of smart meters, network technologies and advanced data analytics services for the water, electric and gas industries. It has more than 80 million metering devices installed globally, and its distinctive FlexNet communications network technology uses licensed spectrum in the U.S. and other geographies and provides secure connectivity solutions that support multiple applications, Xylem said in a statement. Sensus 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. The $1.7 billion cash purchase price is 10.7 times Sensus’ fiscal year 2016 adjusted EBITDA. Xylem expects to achieve at least $50 million in annual cost synergies to be substantially realized within three years of closing as Xylem extends its proven global procurement and continuous improvement initiatives into this business, with significant additional revenue synergy potential. The transaction is expected to be accretive to Xylem’s adjusted earnings in 2017. Xylem will finance the all-cash transaction with the deployment of approximately $400 million of Xylem’s non-U.S. cash, new and existing credit facilities, and a combination of short- and long-term debt. There is no change to Xylem’s full-year 2016 adjusted earnings outlook. Xylem expects to maintain quarterly dividend payments to shareholders. 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 the fourth quarter of 2016. “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,” said Patrick Decker, Xylem’s president and chief executive officer. “This will be an important milestone in our strategy to move Xylem’s portfolio of solutions up the technology curve. 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. “Sensus has a very broad product portfolio in metering and is well positioned in the advanced metering infrastructure (AMI) segment,” Decker continued. “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. 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 added, “This move will also advance the innovation strategy we outlined at our Investor Day last year. Combining the advanced technology and R&D expertise and capabilities of both companies, 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. Both platforms provide a powerful foundation for future organic and inorganic growth opportunities.” In addition to its strong presence in the smart water sector, Sensus generates approximately 24 percent of its revenues from sales to electric and gas utilities. 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, according to Xylem. Sensus President Randy Bays said in the statement, “Xylem is a highly respected company 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.” Speaking on behalf of the Xylem Board of Directors, Xylem Chairman Markos I. Tambakeras said, “This is an excellent transaction and we are enthusiastic about the future combination of these two companies. We have full confidence in the management team’s ability to execute a smooth integration and significantly enhance shareholder value.” Sensus has approximately 3,300 employees and major locations in the U.S., U.K., Germany, Slovakia and China. Nearly 70 percent of 2016 revenues were generated in the U.S.