Evoqua snubs Xylem's $2.5 billion bid for IPO

Evoqua Water Technologies Corp plans to proceed with an initial public offering next week despite an all-cash acquisition offer by Xylem Inc that values it at close to $2.5 billion, including debt, according to people familiar with the matter.

The majority owner of Evoqua, private equity firm AEA Investors LP, rejected Xylem's bid because it believes the stock market will assign a higher valuation on the company, the sources said this week.

Xylem remains interested in Evoqua, and it is possible that it will approach AEA with a new offer before or after the IPO, the sources added. They asked not to be identified because the negotiations were confidential.

Evoqua, Xylem and AEA did not immediately respond to requests for comment.

AEA's stance illustrates the impact that the U.S. stock market's rally has had on the valuation expectations of many private equity firms. They traditionally have opted for the certainty of a quick sale of a portfolio company if it comes at a fair price. AEA paid $730.6 million to acquire Evoqua in 2014.

Evoqua is the largest North American provider of water treatment solutions. Based in Pittsburg, it makes filtration products used for removing impurities from water, rather than neutralizing them through the addition of chemicals.

Evoqua has benefited from several global trends as a growing population, increasing levels of urbanization and more stringent regulations drive demand for cleaner and sustainable waste streams.

The company has scheduled to price a $527 million IPO next week. AEA owns 58.5 percent of Evoqua's common stock and plans to own between 43 percent and 40 percent after the IPO.

Based in Rye Brook, New York, Xylem is a water technology company with a market capitalization of $11.6 billion. 

Source: Nasdaq

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Taxonomy

• Water Treatment & Control
• Water Treatment Solutions
• water treatment