Evoqua shareholders will receive 0.480 new Xylem shares for each Evoqua share they own, representing a premium of about 29% based on last Friday’s closing prices.
WASHINGTON: Water technology company Xylem Inc agreed to buy Evoqua Water Technologies Corp in an all-stock deal for US$7.5bil (RM32bil) on Monday, hoping to capitalise on growing global awareness of water scarcity risks.
Evoqua shareholders will receive 0.480 new Xylem shares for each Evoqua share they own, representing a premium of about 29% based on last Friday’s closing prices.
Shares in Xylem, which provides water and waste water treatment services, closed down nearly 8% on Monday after recouping some earlier losses, as investors disapproved of the hefty price tag.
Evoqua’s wastewater management business has enjoyed broad demand from most of its operations in recent months, but the purchase price, which reaches US$7.5bil including debt, spooked investors, CFRA analyst Jonathan Sakraida said.
While it is not unusual for stock prices of buyers to face pressure from investors after the announcement of sizeable transactions, the rising cost of capital and broader macroeconomic uncertainty of recent quarters have made Wall Street investors even more risk-averse to deals than usual, making it harder to execute mergers successfully.
For instance, Emerson Electric’s shares have been punished by investors since it unveiled an all-cash hostile takeover bid for National Instruments Corp earlier this month.
Explaining the outlay, Xylem executives told analysts that they expected the deal to generate cost synergies of about US$140mil (RM600mil) within three years. Xylem shareholders will control roughly 75% of the combined company after the deal closes.
“Clearly there is upside, both in cost but mainly revenue,” Xylem chief executive officer Patrick Decker told Reuters, adding the companies had not yet committed to revenue targets. — Reuters
