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The
acquisition would make Xylem a major player in the market for
smart meters, 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.
Xylem will finance the deal with about $400 million of its non-U.S.
cash, new and existing credit facilities, and a combination of
short- and long-term debt, the company said in a statement.
Xylem, which manufactures equipment used in water and wastewater
applications, reaffirmed its 2016 earnings forecast and said it
expects the deal to add to its adjusted earnings in 2017.
Reuters exclusively reported earlier on Monday that the
companies were nearing a deal.
Sensus, based in Raleigh, North Carolina, is a supplier of smart
metering and related communications systems to the water, gas,
heat and electric utility sectors. Its revenue was $837 in the
year ended March 2016.
Xylem said the purchase price was 10.7 times Sensus's adjusted
earnings before interest, taxes, depreciation and amortization (EBITDA)
in fiscal 2016. Rye Brook, New York-based Xylem had revenue of
$3.7 billion last year.
Sensus is one of the longest held investments in the history of
private equity. Buyout firm Jordan Company, in partnership with
Goldman Sachs Group Inc's private equity arm, acquired the
company for $650 million in 2003.
Goldman's private equity business still owns 34 percent of
Sensus, with Jordan Company owning the remainder.
Sensus's financial metrics have steadily improved since
bottoming three years ago, driven by stronger end-market demand
and comprehensive cost-cutting initiatives, ratings agency
Moody's Investors Service Inc said earlier this year.
New product launches, combined with Sensus's restructuring
efforts, should benefit operating results over the medium term,
Moody's added.
Xylem had said in a recent investor presentation that it could
deploy as much as $3.5 billion on mergers and acquisitions in
the next five years, with any unspent cash being used to buy
back stock.
Lazard is Xylem's financial adviser and Gibson, Dunn & Crutcher
LLP its legal adviser. Credit Suisse and Goldman, Sachs & Co are
Sensus's financial advisers and Mayer Brown LLP its legal
counsel.
(Reporting by Greg Roumeliotis and Vishaka George; Editing by
Muralikumar Anantharaman and Savio D'Souza)
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