Raleigh smart meter maker Sensus is being acquired for $1.7 billion in cash by Xylem, a publicly traded water technology company based in New York.
Xylem announced before the markets opened Monday that it signed a definitive agreement to acquire Sensus, a privately held business with several hundred employees in the Triangle and 3,300 workers worldwide.
Sensus has more than 80 million metering devices installed across the globe and generated $837 million in adjusted revenue and $159 million in adjusted EBITDA – earnings before interest, taxes, depreciation and amortization – in the fiscal year that ended March 31, Xylem reported in announcing the deal. The purchase price is 10.7 times Sensus’ adjusted EBITDA.
Xylem issued a statement saying that it anticipates that Sensus will continue “to have a meaningful presence in Raleigh.”
Xylem also said it expects to realize $50 million in annual cost synergies within three years of completing the deal. Such cost-cutting efforts typically require job cuts.
Neither Xylem nor Sensus officials responded to requests for comment on how the deal will impact jobs,
Xylem CEO Patrick Decker said during a conference call that the acquisition will “open up attractive, fast-growing markets and provide new growth platforms for Xylem” as well as accelerate its efforts to innovate. He also said the deal would “create new growth and development opportunities” for employees of both companies.
Sensus is owned by investment funds that are affiliated with The Jordan Co., a New York private equity firm, and Goldman Sachs’s GS Capital Partners 2000.
In addition to sales to water utilities, Sensus gets nearly one-fourth of its revenue from electric and gas utilities. It also provides smart grid technology and data analytics services to its customers.
Decker called Sensus’s advanced data analytics services “a hidden gem.”
“They offer the utilities the ability to extract value from ‘Big Data’ to optimize their operations,” Decker said.
The deal is expected to close in the fourth quarter of this year.
Xylem’s announcement didn’t mention what will happen to Sensus’s leadership after the sale is completed, but Decker praised the company’s “excellent management team.” That team, he added, “has made significant changes in the past number of years, which has resulted in stronger operational performance.”
Wall Street appears to approve of the deal. Shares of Xylem rose 4 percent to close at $50.32, a high for the year.
Xylem said that the acquisition would boost its adjusted 2017 earnings by 10 cents to 12 cents per share.
Technology provided by Xylem, which is based in Westchester County, N.Y., enables customers to transport, treat and test water, as well as use it more efficiently. The company generated $3.7 billion in revenue last year and has more than 12,500 employees worldwide.
Sensus moved its headquarters to Raleigh in the late 1990s when it was a subsidiary of a U.K. conglomerate. It became a stand-alone business in 2003.