Sometimes patience pays off.
Minneapolis-based Pentair (NYSE:PNR) announced Sunday evening that it has agreed to acquire a Dutch membrane technology and ultra-filtration manufacturer, Clean Process Technology, from privately held Norit Holding, B.V., for $705 million after an on-again, off-again courtship that goes back more than five years.
In a conference call this morning with investors and the press, Pentair Chairman and CEO Randy Hogan described the transaction as a “bull’s-eye shot” that adds key technology the company currently lacks.
CPT makes ultra-filtration and nano-filtration membranes, which filter out contaminants and make seawater drinkable. These advanced filter membranes will be critical to meet future demand for clean water. Without new water treatment technologies, the existing sustainable water supply will come up 40 percent short of global demand by 2030, Pentair officials said.
Pentair has had CPT on its acquisition radar for several years, Hogan said, and had made an unsuccessful bid five years ago. It began negotiating the current transaction late last year, he added.
The acquisition will boost Pentair’s growth in emerging markets and positions the company to meet growing demand for desalination projects — making ocean water fit for human and industrial consumption. Hogan pointed to the growing populations with increasing wealth in India, China, Latin America, Indonesia and the Middle East where “water usage is going up geometrically … These are all water-starved areas close to the oceans.”
CPT’s advanced filtration products also will find residential applications, Pentair officials said. “We’re going to have to change the way we use water,” filtering and reusing water several times before flushing it away. “That’s already happening in commercial and industrial applications,” he said.
“Technology plays a major role in addressing the increasing challenges of a clean water supply and rising energy costs. With leading membrane technologies, CPT provides components, systems and services that will broaden and deepen our capabilities in desalination, water reuse and high efficiency industrial applications — and enable us to provide more integrated solutions to our customers,” Hogan said in a prepared statement.
Pentair estimates CPT full-year 2011 sales to be more than $350 million. The company said it expects to fund the acquisition with a combination of cash, revolving credit facility funding and investment grade financing. Its stock closed Friday at $38, and Pentair reported sales growth of 13 percent to $3 billion for all of 2010.
Based in the Netherlands, CPT has about 1,200 employees and operates five production and research and development facilities. With more than 170 distributors in 100 countries, CPT generates about 45 percent of its revenues in Western Europe, 20 percent in Asia-Pacific and nearly 10 percent in each of Latin America and the Middle East, with the balance in North America and other parts of Europe.
The transaction is expected to close in the second quarter.