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Xylem to acquire smart meters manufacturer Sensus

US-based water technology company Xylem has signed a definitive agreement to acquire metering and analytics specialist Sensus for approximately $1.7 billion (€1.5bn) in cash. 

Sensus is a provider of smart meters, network technologies, and advanced data analytics services for the water, electric, and gas industries, with more than 80 million metering devices installed globally.

Its distinctive FlexNet communications network technology uses licensed spectrum in the US and other geographies and provides secure connectivity solutions that support multiple applications. 

Xylem expects to achieve at least $50 million in annual cost synergies to be substantially realised within three years of closing

The transaction is expected to be accretive to Xylem’s adjusted earnings in 2017.

“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,” said Patrick Decker, Xylem president and CEO.

“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,” Decker added.

In addition to its presence in the smart water sector, Sensus generates approximately 24% 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. 

Randy Bays, president of Sensus, said: “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.”

Sensus has approximately 3,300 employees and major locations in the US, UK, Germany, Slovakia, and China, with nearly 70% of 2016 revenues generated in the US.  

Xylem will finance the all-cash transaction with the deployment of approximately $400 million of Xylem’s non-US cash, new and existing credit facilities, and a combination of short- and long-term debt.

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.