Xylem To Acquire Pure Technologies, A Leader In Smart Infrastructure Assessment And Management For The Water Industry

• Expands Xylem’s smart water portfolio, further advancing its strategy to be a leader in intelligent technology solutions for the water industry
• Adds unique diagnostic and analytics tools that complement previously acquired Visenti and Sensus solutions, creating combined offering to address global infrastructure challenges and enhance customer economics
• Builds on previously announced commercial partnership in key emerging markets
• Acquisition valued at USD$397M; expected to be modestly accretive to 2018 adjusted earnings

Xylem Inc., a leading global water technology company, recently announced that it has entered into a definitive agreement to acquire all the issued and outstanding shares of Pure Technologies Ltd. (Pure) for CAD $9.00 per share in cash, representing an enterprise value of CAD$509M, or USD$397M. Pure’s Board of Directors has unanimously approved the transaction and recommends that Pure shareholders vote in favor of the transaction.

Pure provides unique diagnostic and analytics solutions and services based on proprietary technologies to address key water and wastewater infrastructure challenges. It is a leader in intelligent leak detection and condition assessment solutions for water distribution networks, a rapidly growing market driven by the increasing adoption of digital solutions to improve 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 Patrick Decker, Xylem President and Chief Executive Officer. “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. 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.”

Earlier this year, Xylem and Pure entered into an exclusive commercial partnership in which Xylem represents Pure’s products and services in parts of the Middle East, India and Southeast Asia.

Mr. Decker continued, “We have already begun executing on significant international growth opportunities through our existing commercial collaboration. Upon closing this transaction, those efforts will accelerate and expand globally. We are excited to be adding a tremendously talented team to Xylem that shares our commitment to bringing innovative solutions to the water industry. We look forward to continuing that work together to create substantial value for our customers and shareholders.”

Pure reported consolidated revenue of CAD$126M and CAD$21M in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the 12 months ending September 30, 2017. Xylem expects to achieve at least $12M 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 USD$397M valuation represents a multiple of approximately 17x 2018 estimated adjusted EBITDA for Pure, 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 Jack Elliott, President and CEO of Pure. “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.”

Headquartered in Calgary, Alberta, Pure has approximately 500 employees globally. It has corporate offices in Mississauga, Ontario, and Columbia, MD, as well as regional offices across the U.S., Mexico, Colombia, Australia and China. Approximately 90 percent of its 2016 revenues were generated in North America.

Xylem will finance the transaction with cash and low interest, short-term debt. The transaction is subject to various customary closing conditions, including receipt of Canadian Court, Pure shareholders’ and regulatory approval under the Hart-Scott-Rodino Act (United States). It 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% of the outstanding common shares of Pure, have entered into voting support agreements with Xylem pursuant to which they have agreed to vote all of their voting securities in favor of the transaction, subject to their ability to terminate such agreements in certain circumstances.

The definitive agreement provides for customary board support and non-solicitation covenants, subject to a “fiduciary out” for unsolicited superior proposals, subject to Xylem’s right to match such superior proposals. The definitive agreement provides for the payment of a termination fee of CAD$25M to Xylem in certain circumstances.

Advisors
Lazard is serving as financial advisor to Xylem and Gibson, Dunn & Crutcher LLP and Stikeman Elliott LLP are serving as its legal counsel. National Bank Financial was retained by Pure’s Special Committee of its Board of Directors as its exclusive financial advisor in connection with this transaction. McCarthy Tetrault LLP acted as legal counsel to Pure and Osler, Hoskin & Harcourt LLP acted as legal counsel to its Board’s Special Committee.

Conference Call/Webcast
Xylem management will host a conference call with investors to discuss the proposed acquisition of Pure Technologies on Monday, December 11, at 9:00 a.m. (ET). The call can be accessed by calling (973) 935-2945 (ID #6374199) or by visiting http://investors.xyleminc.com.

A replay of the briefing will be available on http://investors.xyleminc.com and via telephone until Friday, January 12, 2018, at 11:30 p.m. (ET). The telephone replay will be available at (800) 585-8367 or (404) 537-3406 (ID #6374199).

About Xylem
Xylem (XYL) is a leading global water technology company committed to developing innovative technology solutions to the world’s water challenges. The Company’s products and services move, treat, analyze, monitor and return water to the environment in public utility, industrial, residential and commercial building services settings. With its October 2016 acquisition of Sensus, Xylem added smart metering, network technologies and advanced data analytics for water, gas and electric utilities to its portfolio of solutions. The combined Company’s nearly 16,000 employees bring broad applications expertise with a strong focus on identifying comprehensive, sustainable solutions. Headquartered in Rye Brook, New York with 2016 revenue of $3.8B, Xylem does business in more than 150 countries through a number of market-leading product brands.

The name Xylem is derived from classical Greek and is the tissue that transports water in plants, highlighting the engineering efficiency of our water-centric business by linking it with the best water transportation of all – that which occurs in nature. For more information, visit www.xylem.com.