Eyeing Water Scarcity, Xylem to Buy Evoqua for $7.5 Billion

With risks surrounding the global water supply becoming increasingly apparent, tech company Xylem Inc. agreed in January to acquire Pittsburgh-based Evoqua Water Technologies Corp. in a $7.5 billion all-stock deal. Evoqua serves industrial, municipal, and recreational customers in nine countries.

Evoqua shareholders will receive 0.480 new Xylem shares for each Evoqua share they own.

Become a Subscriber

Please purchase a subscription to continue reading this article.

Subscribe Now

Xylem investors were wary of the weighty purchase price, Jonathan Sakraida, Analyst for CFRA Research, told Reuters. Though a hefty deal can sometimes elicit such pressure, the rising cost of capital and macroeconomic uncertainty has made Wall Street investors more risk-averse than usual.

On a conference call with analysts, Xylem executives said they projected about $140 million in cost synergies within three years. After the deal closes, Xylem shareholders will control about 75% of the combined company.

Evoqua is a leader in North America water treatment. It should complement 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. In addition, Evoqua is a leader in the remediation of emerging contaminants, including PFAS (perfluoroalkyl and polyfluoroalkyl substances).

Population growth, industrial expansion, and increased agricultural development have increased demand for fresh water around the world in recent years.

"When you think about what's going on around water infrastructure, the issues of scarcity, resilience, affordability . . . it's the right time for us to be together," Xylem Chief Executive Officer Patrick Decker told Reuters. He will stay on to lead the company, and Evoqua CEO Ronald Keating is expected to step down, Reuters reported.