Invensys plc, seemingly always ripe for a carveout, sold its metering business to The Jordan Co. in a $650 million transaction. Jordan will acquire the company through its newly formed acquisition vehicle IMS Meters Holdings and will contribute equity from The Resolute Fund L.P., a $1.5 billion fund that Jordan closed in September 2002.
Jordan will finance the metering transaction with a mix of equity and debt. Credit Suisse First Boston and Goldman Sachs will lead the debt syndicate, which will be a blend of senior and subordinated contributions.
The acquired unit has been a steady performer for the ever-shedding Invensys, having last reported annual operating profits of GBP44 million, on sales of GBP329 million. The company is global in its reach, and according to Jordan Senior Principal Jonathan Boucher is “very consistent and a strong cash flow generator.”
The metering business now joins the ranks of other Invensys castoffs from the past two years, such the company’s former Baan ERP software unit, its Drive Systems division, lubrication equipment manufacturer Alemite, industrial batteries unit Energy Storage Group and Rexnord, an industrial components manufacturer. Meanwhile, Jordan represents just the latest buyout shop to dip into the Invensys pool, joining the likes of General Atlantic Partners, Cerberus Capital Management, The Carlyle Group, Sentinel Capital Partners and Morgan Stanley Private Equity, to name a few.
Meter Guys Eyeing Vacuum Sales?
However, while historically pigeonholed as a slow-growth, but consistent business, there are changes afoot in the metering industry that may end that stereotype as well as put a stop to those monthly house visits from the meter guy. IMS, Boucher said, is more of a diversified metering outfit, which still employs the more mature, traditional methods of metering the door-to-door measurements but also the newer methods of gauging gas and electric use, using Automated Meter Reading (AMR) methods. More specifically, AMR employs radio frequencies to transmit monthly meter readings, sending the information either to a fixed location or a car or van that can capture the measurements just by driving by a residence.
“This purchase gives us a combination of the low, steady growth piece of the business combined with the high-growth, tech-driven metering platforms,” Boucher said. He added that the growth rate of the door-to-door divisions is generally in the 3% range, while the AMR opportunities present IMS with the potential to achieve growth of 15% to 20% in that arena.
“Our history is that we work with management to grow the company and execute a buy and build strategy,” Boucher said, adding that the current management team will stay in place. As far as an exit strategy, it is still too early to tell, although Jordan will be opportunistic with whatever situation presents itself, he said.