A.O. Smith Buys Water Filter Maker

Continuing to invest in the business of water treatment, A.O. Smith Corp. on Monday announced it has bought Aquasana Inc. of Austin, Texas, for $87 million.

Aquasana makes water treatment products such as shower filters, faucet filters, whole-house filters and water-softening systems.

The deal provides A.O. Smith, a maker of water heaters that's been expanding into water technology markets, with access to the $2 billion U.S. residential water treatment market.

“This acquisition fits squarely within our stated strategy to expand our core product offerings to new geographies that present growth opportunities,” said Ajita Rajendra, A. O. Smith chairman and chief executive, in a statement.

“We believe the water quality needs for U.S. consumers are evolving as aging water infrastructure and consumer awareness highlight the increasing number of unhealthy drinking water situations.”

The acquisition is expected to be neutral to earnings per share in 2016, if $1 million in on-time purchase accounting charges and professional fees tied to the deal are excluded, the company said.

A.O. Smith sees opportunities to expand the revenue of Aquasana and its own water treatment products by $25 million to $30 million in the next two to three years.

A.O. Smith has developed reverse osmosis water treatment technology that it says has a leading market position in China, and this deal would help bring the product to the U.S. market.

In addition, A.O. Smith will look to sell Aquasana’s products, now primarily sold to U.S. consumers, around the world.

“Our acquisition of Aquasana expands our growing global water treatment business, with expected combined pro forma 2016 revenues of approximately $200 million,” Rajendra said. “A.O. Smith brings its global presence, manufacturing expertise, and retail/wholesale relationships to Aquasana’s experienced management team, direct-to-consumer selling competencies, and premium water treatment brand in the U.S.”

The company said it expects Aquasana sales could reach $100 million in 2019. A.O Smith funded the acquisition with borrowing through its $400 million revolving credit facility.

As a result of the deal, A.O. Smith said it has revised its plans for its stock buyback program. The company now expects to repurchase $135 million of its own shares, down from a prior forecast of $175 million.

In its fiscal second quarter, A.O. Smith reported a 2% increase in sales and record net earnings of $87.1 million, or 98 cents a share.

A.O. Smith's shares closed down 56 cents at $93.79 Monday. The shares are up 22% so far this year.

Source: Journal Sentinel

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Taxonomy

• Purification
• Technology
• Filters
• Business Strategy
• water treatment
• Water