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Xylem eyes analytics market through Pure acquisition

New Delhi : US-based global water technology major Xylem has said it is acquiring Canada-headquartered Pure Technologies, a provider of diagnostic and analytics solutions and services for water and wastewater industries.

The transaction is valued at an enterprise value of CAD$509 million ($397 million) and will allow Xylem scale its growing data analytics and software-as-a-service capabilities.

Pure Technologies, listed on the Toronto Stock Exchange, specializes in intelligent leak detection and condition assessment solutions for water distribution networks. This segment has been witnessing robust growth driven by the increasing adoption of digital solutions to improve water utilities’ capital and operating efficiency.

“The addition of Pure will strengthen Xylem’s position as a leading provider of intelligent solutions that address the water industry’s most persistent problems,” said Xylem president and chief executive officer Patrick Decker.

“Aging infrastructure is a top concern of water utilities around the world, and infrastructure assessment is an attractive, growing market that directly addresses this challenge in a cost-effective way,” Decker said, addding that, "Pure’s solutions strongly complement the broader Xylem portfolio, particularly our recently acquired Visenti and Sensus solutions, creating a unique and disruptive platform of diagnostic, analytics and optimization solutions for clean and wastewater networks".

"Pure will also bring greater scale to our growing data analytics and software-as-a-service capabilities. As one company, we will provide customers with even more powerful and innovative solutions enabled by cutting-edge technologies", he added.

In early 2017, Xylem and Pure had entered into an exclusive commercial partnership, through which Xylem represents Pure’s products and services in parts of the Middle East, India and Southeast Asia.

Upon closing the transaction, those efforts will accelerate and expand globally.

Pure reported consolidated revenue of CAD$126 million and CAD$21 million in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the 12 months ended September 2017.

Xylem expects to achieve at least $12 million in annual cost synergies within two years of closing, including elimination of redundant public company costs, and procurement and footprint consolidation opportunities.

Xylem also expects to generate revenue synergies that include accelerated international growth and cross-selling of complementary customer solutions. The $397 million valuation represents a multiple of approximately 17x 2018 estimated adjusted EBITDA for Pure Technologies, or approximately 11x including run-rate cost synergies.

“Throughout Pure’s evolution, we have been committed to delivering innovative and value-added solutions for our infrastructure clients,” said Pure Technologies President and CEO Jack Elliott.

“Following this transaction, as we become part of a larger, global enterprise, we will be even better positioned to make a meaningful impact in solving the world’s most pressing water and infrastructure challenges. The acquisition of our company by Xylem will be of substantial benefit to Pure, its clients and employees".

Xylem will finance the transaction with cash and low interest, short-term debt. The transaction is expected to close in the first quarter of 2018.

All of the directors and executive officers of Pure, who together hold in aggregate approximately 12 per cent of the outstanding common shares of Pure, have agreed to support the transaction.

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