Xylem Moves Into Smart Metering Business with $1.7B Sensus Deal

Water technology company Xylem is getting into the business of real-time monitoring of water and energy consumption through a $1.7 billion deal to acquire smart meter company Sensus.

Rye Brook, NY-based Xylem (NYSE: XYL) announced the agreement—an all cash deal—this morning. Sensus, based in Raleigh, NC, sells to utilities hardware and software used for so-called advanced metering infrastructure (AMI), utility industry-speak for technologies that enable two-way communication between a meter and the utility company.

Xylem, which takes its name from classical Greek and the name of tissue that transports water in plants, provides utilities and industrial customers technologies that help manage water and wastewater. The company reported $3.6 billion in 2015 revenue, most of that from business in the United States and Europe, though it adds that emerging markets in Eastern Europe, Latin America, and Asia are growing. Water technologies are gaining traction in certain water tech hubs, as Xconomy reported last year.

Xylem has been an active buyer in the water tech sector. In February, Xylem acquired Houston-based coastal and ocean management analytics company Tideland Signal Corporation for $69 million. Last Year, Xylem spent $18 million to acquire Hypack, a Middletown, CT-based company that provides software used to survey water resources. Xylem also made a pair of acquisitions in 2013, buying water and wastewater technologies company Multitrode for $26 million and wastewater installation and maintenance service company PIMS Group for $57 million.

With the Sensus deal, Xylem will supplement its water technologies portfolio with the Raleigh company’s smart meter products that are used for real-time monitoring of water, electricity, and natural gas consumption. Sensus says that more than 80 million of its smart meters have been installed throughout the world. Interest in AMI technology is growing as utilities look to glean consumption information that can help them manage demand and become more efficient. Research firm Markets and Markets projects that the global AMI market will grow from $10 billion in 2015 to $19.5 billion in 2020.

Sensus is privately owned by investment funds that are affiliated with The Jordan Company and GS Capital Partners 2000. The company was formed in 2003 through the acquisition of Invensys Metering Systems for $650.3 million, according to regulatory filings. In fiscal 2016, Sensus reported $837 million in revenue. The $1.7 billion that Xylem is paying for Sensus is more than 10 times the $159 million in adjusted earnings that the company reported for fiscal 2016. Xylem expects the combination of the two companies will lead to $50 million in annual cost savings, and possibly more as the two product lines work together. Sensus’ network, FlexNet, can support Xylem’s Internet-connected products, the water technologies company says.

“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,” Xylem President and CEO Patrick Decker said in a prepared statement. “Our expansive customer relationships will be able to extend the reach of Sensus’ products and technologies to new markets globally, particularly in emerging markets.”

The acquisition is still subject to customary closing conditions and regulatory review, but the companies expect to close the deal in the fourth quarter.

Frank Vinluan is editor of Xconomy Raleigh-Durham, based in Research Triangle Park. You can reach him at fvinluan [at] xconomy.com Follow @frankvinluan

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