- Transformational combination of two leaders in sustainable
water solutions for health, human safety and the environment
- Significant expansion of size, scale and addressable
market
- Adds leading drinking water business with significant growth
and margin potential
- Advances Environmental, Social and Governance (ESG) and
sustainability mission
- Accelerated growth opportunities by pairing two iconic brands
with complementary products leveraging the Zurn Business
System
- Clear path to driving $50 million in run-rate cost
synergies
- Positioned to deliver superior shareholder value coupled with a
strong balance sheet - planned increase in Zurn quarterly cash
dividend after close of transaction
- Conference call to discuss transaction today at 7:30 a.m. CT /
8:30 a.m. ET
Zurn Water Solutions Corporation (NYSE: ZWS), a market leader in
smart, sustainable water solutions and products, and Elkay
Manufacturing Company, a market leader in the highly attractive and
growing commercial drinking water solutions business, announced
today they have reached a definitive agreement to combine the
businesses in an all-stock transaction. Upon completion of the
transaction, Zurn Water Solutions shareholders will own
approximately 71% and Elkay shareholders will own approximately 29%
of the combined and newly named company – Zurn Elkay Water
Solutions Corporation.
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“This transaction is a true game-changer as we create an even
stronger pure play water company by combining with the iconic
brand, Elkay,” said Todd A. Adams, Chairman and CEO of Zurn Water
Solutions. “The combination puts us well on our way to doubling the
size of the business over the next couple of years while enhancing
our competitive advantage within specified water solutions. We also
add the high-growth, and increasingly essential, drinking water
sector in our portfolio and have a clear path to capitalize on the
significant synergies the combination will generate.
“Elkay is viewed as the ‘gold standard’ in providing clean
drinking water within institutional and commercial buildings. What
makes the combination so compelling is the alignment of our shared
values and cultures, commitment to serving our customers and what
we can accomplish together by providing an even more comprehensive
package of innovative, specified water solutions that provide water
safety, water quality and water conservation to critical verticals
like education and healthcare.
“I want to thank Ron Katz, Senior Member of the founding family,
and Tim Jahnke, Chairman of Elkay, for believing in the power of
the combination and the entire Elkay family for their confidence
and commitment to work together to create something special. It’s
our intent to preserve the strong culture and values at Elkay and
we are excited to build upon the incredible legacies of both
businesses as we come together to create an even brighter future as
Zurn Elkay Water Solutions.”
Elkay has been family-owned since it was founded in 1920 and has
been making innovative products and delivering exceptional customer
service for over 100 years. Headquartered in Illinois, Elkay has
similar midwestern core values as Zurn. While the business started
in sinks, their continued innovation and growth has led them to
currently being a market leader in drinking water as well as sinks
in residential and commercial settings.
“We knew we could increase our long-term competitive position by
combining with another complementary brand,” stated Ron Katz,
Senior Member of the founding family. “We were pleased to find a
well-respected partner in Zurn Water Solutions, with their strong,
people-centric midwestern values and deep commitment to quality,
ethics, and customer satisfaction that mirrors our own.”
“This combination clearly creates a unique and dynamic set of
competitive advantages for our customers to capitalize on the
unrivaled product solution breadth and depth we’ll bring to the
marketplace,” said Adams. “Together, Zurn and Elkay will also
provide our customers the capability to advance their ESG
initiatives while reducing their overall initial and operating
costs while providing a safe, clean environment for students,
patients, patrons, and people within the public and private spaces
they operate. Finally, we believe this combination creates an
attractive platform to provide superior shareholder value as the
combination allows for increased growth, margin expansion, higher
free cash flow and improved leverage all while providing ample room
for continued investments in growth.”
Key Strategic and Financial Benefits
- Creates a North American water solutions leader.
- Brings together two businesses with leading brand recognition
and loyal customer relationships.
- Establishes an immediate leadership position in the rapidly
growing and highly attractive commercial drinking water solutions
category.
- We will leverage the Zurn Business System (ZBS) to drive
continuous improvement throughout the combined business to drive
elite financial performance.
- Creates opportunity for an estimated $50 million of cost
synergies by 2025, with approximately $25 million realized in year
one. Expected synergies to be driven by procurement, business
efficiencies, cross-marketing and our combined best-in-class rep
network.
- Transaction reduces net debt leverage to ~1.0x by end of 2022
and coupled with a larger balance sheet provides continued growth
capital while increasing capital return to shareholders as the Zurn
Water Solutions Board of Directors plans to increase the quarterly
cash dividend to $0.07 per share after close of the
transaction.
- Unites deeply aligned core values and cultures where people
matter most and share a combined 224-year company history.
- Shared cultures focused on serving customers, Diversity, Equity
& Inclusion, commitment to water and environmental stewardship,
and commitments to the communities where employees live and
work.
Governance and Locations
Upon closing, the combined company will continue to be led by
the existing Zurn Water Solutions Board of Directors with the
addition of two new directors who currently serve on the Elkay
Board of Directors. Todd Adams will remain Chairman and Chief
Executive Officer, Craig Wehr will remain President of Zurn Water
Solutions, and Ted Hamilton will remain President of Elkay
Plumbing.
The combined company will continue to trade under the ticker
NYSE: ZWS. It will be headquartered in Milwaukee, Wisconsin and
will continue to maintain a presence in the Chicago area where
Elkay is headquartered.
Transaction Structure and Closing Conditions
Under the terms of the transaction agreements Elkay shareholders
will receive up to 52.5M shares of Zurn Water Solutions, which
results in, Elkay shareholders owning approximately 29% in the
combined company.
Based on the February 11, 2022 closing price of Zurn’s common
stock, the transaction values Elkay at $1.56 billion, representing
14.2x its forecasted 2022 Adjusted EBITDA, or 9.8x after factoring
in forecasted run-rate cost synergies. The transaction is subject
to regulatory approvals, Zurn Water Solutions and Elkay shareholder
approval, and customary closing conditions, and is expected to
close in the third quarter of 2022. Elkay shareholders holding
approximately 73% of Elkay’s common stock have entered into support
agreements committing them to vote all of their respective shares
in favor of the transaction, and against any competing acquisition
proposal.
Conference Call and Investor Information
Zurn Water Solutions will hold a conference call and webcast
presentation on Monday, February 14, 2022 at 7:30 a.m. Central Time
to discuss the transaction.
Domestic toll-free #: 888-510-2359 International toll #:
646-960-0215 Access Code: 7660247
A live webcast of the call will also be available on Zurn’s
investor relations website. Please go to the website
(investors.zurnwatersolutions.com) at least fifteen minutes prior
to the start of the call to register, download and install any
necessary audio software. If you are unable to participate during
the live teleconference, a replay of the conference call will be
available from 10:00 a.m. Central Time February 14, 2022 until
10:59 p.m. Central Time, February 21, 2022. To access the replay,
please dial 800-770-2030 (domestic) or 647-362-9199
(international). The Conference ID for the replay is: 7660247. The
replay will also be available as a webcast on the Company’s
investor relations website.
Advisors
Evercore is serving as financial advisor to Zurn Water
Solutions, and Morgan, Lewis & Bockius LLP is serving as legal
counsel. Citi and J.P. Morgan Securities LLC are serving as
financial advisors to Elkay, and Mayer Brown is serving as legal
counsel.
About Zurn Water Solutions
Headquartered in Milwaukee, Wisconsin, Zurn Water Solutions is a
growth-oriented, pure-play water business that designs, procures,
manufactures, and markets what we believe is the broadest
sustainable product portfolio of solutions to improve health, human
safety, and the environment. The Zurn product portfolio includes
professional grade water control and safety, water distribution and
drainage, finish plumbing, hygienic, environmental and site works
products for public and private spaces. Additional information
about the Company can be found at zurnwatersolutions.com.
About Elkay
Family-owned since 1920, Elkay has been making innovative
products and delivering exceptional customer care for almost a
century. While proud to be America's No. 1 selling kitchen sink
company, Elkay expanded its commercial offerings more than four
decades ago and today delivers faucets, water coolers, drinking
fountains, Smartwell Water Delivery Systems, and the award-winning
ezH2O bottle filling stations, in addition to world-class stainless
steel and quartz sinks. Like your family, Elkay has values and
traditions that endure - like our commitment to sustainability and
giving back to our community. Headquartered in the United States in
Downers Grove, Illinois, Elkay employs over 1,800 employees
worldwide, working from 13 locations across the U.S., China, and
Mexico. For more information, visit www.elkay.com.
Forward-Looking Statements
This communication contains certain “forward-looking statements”
including statements regarding the anticipated timing and benefits
of the combination of Zurn and Elkay (the “Transaction”). These
forward-looking statements are based on our current expectations
and beliefs, but there can be no assurance that these will be as
anticipated. These forward-looking statements involve a number of
risks, uncertainties (some of which are beyond our control) or
other assumptions that may cause actual results or performance to
be materially different from those expressed or implied by these
forward-looking statements. These factors include, among others:
the inability to complete the Transaction, including due to the
failure to receive required Zurn shareholder approvals or the
failure of other closing conditions; the inability to recognize the
anticipated benefits of the proposed Transaction, including the
forecasted cost synergies; and costs related to the proposed
Transaction. Except as required by law, we do not undertake any
obligation to update or revise any forward-looking statements
whether as a result of new information, future events or
otherwise.
Non-GAAP Financial Measures
In this press release we disclose projected 2022 net debt
leverage, pro forma for the Transaction. Net debt leverage is a
non-GAAP financial measure, computed as the ratio of total debt
less cash to Adjusted EBITDA, used by management and investors as a
measure of Zurn’s financial strength and ability to incur
incremental indebtedness when making key investment decisions and
evaluating us against peers. “Adjusted EBITDA” is the term we use
to describe EBITDA as defined and adjusted in Zurn’s credit
agreement, and EBITDA represents earnings from continuing
operations before interest and other debt related activities,
taxes, depreciation and amortization. We believe that these
financial measures are appropriate to enhance an overall
understanding of Zurn’s underlying operating performance trends
compared to historical and prospective periods and Zurn’s peers.
Non-GAAP financial measures should not be considered in isolation
from, or as a substitute for, financial information calculated in
accordance with GAAP.
Additional Information
In connection with the Transaction, we intend to file a
registration statement on Form S-4 with the Securities and Exchange
Commission (“SEC”) that will include a proxy statement/prospectus
relating to the Transaction. SECURITY HOLDERS ARE URGED TO READ THE
PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS WHEN
THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE TRANSACTION. A definitive proxy statement
will be sent to stockholders of Zurn seeking approval of the
Transaction. The documents relating to the Transaction (when they
are available) can be obtained free of charge from the SEC’s
website at www.sec.gov. These documents (when they are available)
can also be obtained free of charge by contacting us at
855-480-5050.
No Offer or Solicitation
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities, or a solicitation
of any vote or approval, nor shall there be any sale of securities
in any jurisdiction in which such offer, solicitation, or sale
would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
Participants in the Solicitation
This communication is not a solicitation of a proxy from any
security holder. Zurn, Elkay and their respective directors,
executive officers, other members of management and employees may
be deemed to be participants in the solicitation of proxies from
Zurn’s stockholders in connection with the Transaction. Information
regarding the names and interests in the proposed transaction of
Zurn’s directors and officers is contained Zurn’s filings with the
SEC. Additional information regarding the interests of potential
participants in the solicitation process will also be included in
the proxy statement/prospectus relating to the Transaction and
other relevant documents when they are filed with the SEC. These
documents can be obtained free of charge from the sources indicated
above.
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version on businesswire.com: https://www.businesswire.com/news/home/20220213005091/en/
Investor Relations: Dave Pauli, Vice President – Investor
Relations 414-223-7770
Media Relations Zurn: Angela Hersil, Director – Corporate
Communications 855-480-5050 414-808-0199
Corporate.Communications@zurn.com
Media Relations Elkay: Linda Carlisle, Corporate
Responsibility & Communications 630-572-2330
linda.carlisle@elkay.com
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