Water technology company Xylem is diving into the growing market for smart meters by acquiring Sensus USA for about $1.7 billion.
Sensus has more than 80 million metering devices installed globally, serving an advanced metering infrastructure (AMI) segment that, according to Xylem, is growing at nearly twice the rate of the total metering space. Its revenue was $837 million in the year ended March 2016.
According to Reuters, Xylem is betting that the AMI segment will continue to grow “at a time when regulatory requirements and a drive for savings are pushing both companies and consumers to control their water and energy consumption more tightly.”
“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,” Xylem CEO Patrick Decker said in a news release Monday. “This will be an important milestone in our strategy to move Xylem’s portfolio of solutions up the technology curve.”
Sensus was acquired by buyout firm Jordan Company, in partnership with Goldman Sachs Group.’s private equity arm, for $650 million in 2003. Goldman’s private equity business still owns 34% of Sensus, with Jordan Company owning the remainder.
Moody’s Investors Service reported earlier this year that Sensus’s financial metrics had steadily improved since bottoming three years ago, driven by stronger end-market demand and comprehensive cost-cutting initiatives.
According to Xylem, Sensus generates approximately 24% of its revenue 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,” Xylem said.
Xylem transports and treats water and wastewater for water reuse, and offers technology to test water and other fluids. Its shares rose 3.9% to $50.32 on news of the Sensus deal.
“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,” Decker said.