Itron, Inc. ITRI has completed the acquisition of Silver Spring Networks, Inc. SSNI for $830 million. The buyout of this Internet of Things (IoT) company is anticipated to strengthen Itron’s ability to deliver a broader set of solutions, accelerate the pace of growth and innovation in the smart city and industrial IoT markets.
In September 2017, Itron signed a definitive agreement to acquire all outstanding shares of Silver Spring for cash and $750-million new debt. For this, Itron has offered $300 million of 5% senior notes due 2026. The company intends to utilize the funds to refinance its existing indebtedness and Silver Spring’s indebtedness, as well as pay fees and expenses.
The above-mentioned deal is a significant merger in the IoT ecosystem, as both companies are heavily focused on internet-connected devices and solutions. This strong combination will address end-to-end solutions for customers by controlling energy and water resources.
Through the deal, Itron will merge the best of the companies’ complementary technologies to provide streamlined solutions on standard-based platforms. By integrating Silver Spring Networks’ platform and solutions, including its smart street light offering, into Itron’s broad portfolio will help the latter continue with its multi-vendor offerings for the smart utility and smart city sectors.
Itron anticipates this acquisition to generate annualized cost synergies of $50 million three years from now. This will also be accretive to the company’s gross margin in full-year 2017 results and add to adjusted earnings per share in the next year.
Further, the buyout will drive Itron’s long-term growth and help boost its profitability beyond the mid-teens EBITDA margin target. In addition, the deal is likely to create additional revenue synergy potential for the company.
Moreover, Itron remains focused on enhancing its existing portfolio and anticipates to grow through a combination of internal new product development, licensing technology, distribution agreements, partnering arrangements, and acquisitions of technology.
However, Itron has underperformed the industry it belongs to in the past year, mainly due to elevated expenses. The company’s shares have gained 12.8% compared with 49.9% growth recorded by the industry.
Zacks Rank & Key Picks
Itron currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the same industry include AMETEK, Inc. AME and Fortive Corporation FTV. Both stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
AMETEK has a long-term earnings growth rate of 11.9%. Its shares have rallied 19.6%, over the past six months.
Fortive has a long-term earnings growth rate of 10.2%. The stock has gained 13.7% during the same time frame.
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