Xylem to acquire Evoqua for $7.5 billion in a push to expand to industrial markets

“We are excited about building the world’s most powerful platform for solving water alongside our Evoqua colleagues.”

Water tech firm Xylem announced on Monday it is acquiring Evoqua Water Technologies Corp in an all-stock deal valued at $9.5 billion to create a transformative platform to address the world’s most critical water challenges. The acquisition will boost Xylem’s wastewater treatment solutions and provide it access to several industrial markets.

The announcement comes amid rising demand for freshwater due to population growth, industrial expansion, and increased agricultural development. As part of the deal, Evoqua stockholders will receive 0.480 shares of water technology company Xylem for each share held, representing a premium of about 29% based on the share’s last close.

According to the acquisition agreement, the combined company will be led by Xylem’s president and chief executive officer, Patrick Decker after the deal closes in mid-2023, the company said in an announcement.

Founded in 2011, Xylem manufactures equipment used in water and wastewater applications. Its technology is used in public utility, residential, commercial, agricultural, and industrial settings. The company does business in more than 150 countries, while Pittsburgh, Pennsylvania-based Evoqua operates in more than 150 locations across nine countries and provides wastewater treatment solutions to industrial, municipal, and recreational customers.

This is Xylem’s major announcement in seven years. In 2016, the company acquired Sensus USA Inc, a provider of advanced metering technologies to utilities. With this acquisition, Evoqua complements Xylem’s distinctive portfolio of solutions with advanced water and wastewater treatment capabilities, a powerful and extensive network of service professionals, and access to a number of attractive industrial markets with resilient, recurring revenue streams.

Evoqua’s solutions, including digitally enabled offerings, optimize and outsource mission-critical water treatment systems for customers in high-growth sectors such as life sciences, microelectronics, power, and food and beverage.

As water risks rise in global importance, this transaction unites two companies with a shared focus on solving the world’s water challenges by addressing customers’ and communities’ most critical needs. Building on Xylem’s global leadership in water solutions and Evoqua’s leadership in advanced treatment solutions and services, the combined company will be uniquely positioned to develop and deliver an even more comprehensive offering of innovative solutions.

In the 12-month period ending September 30, 2022, the two companies generated over $7 billion in combined revenue, with $1.2 billion in adjusted EBITDA. The combination unlocks compelling new growth opportunities and is expected to deliver run-rate cost synergies of $140 million within three years, driven by scale efficiencies in procurement, network optimization and corporate costs. In addition, the transaction allows Xylem to maintain its strong balance sheet, which provides the combined company with significant strategic flexibility and optionality.

“Solving the world’s water challenges has never been more urgent. Our acquisition of Evoqua creates a transformative global platform to address water scarcity, affordability and resilience at even greater scale,” said Patrick Decker, President and CEO of Xylem. “The combined company delivers an unparalleled portfolio of advanced technologies, integrated services and application expertise across the water cycle.”

“Together, our complementary businesses will be even more strongly positioned to help our customers and communities tackle their most challenging water needs,” continued Decker. “We are excited about building the world’s most powerful platform for solving water alongside our Evoqua colleagues.”