Allete to buy majority stake in US Water Services

US based Allete has signed a deal to buy 87% stake in integrated water management company, US Water Services for $168m.

Following the deal, the remaining stake will be continued to be owned by current employees and management of US Water.

In future, Allete plans to buy the remaining stake based on US Water’s financial performance.

Allete chairman, president and CEO Al Hodnik said, "Water and energy are intricately linked, and attention to that nexus is increasing.

"Just as with energy, regulation and social expectations will increasingly drive water conservation, especially as water scarcity becomes a growing challenge.

"We believe the demand for sustainable water management solutions will increase over time as large users seek ways to enhance efficiency and improve their bottom line."

Minnesota, US based US Water offers integrated water management combining chemical, equipment, engineering and service.

It offers customised solutions to cut down water and energy usage and improve efficiency and claimed to have about 3600 industrial customers.

The acquisition is said to be in line with Allete’s strategy to invest in energy infrastructure and related services to complement its core regulated utility, balance exposure to business cycles and changing demand.

Following the acquisition, Allete will now focus its infrastructure and related service business.

Hodnik added, "US Water is an attractive size for Allete, has demonstrated consistent growth, and will provide supportive cash flows with minimal capital requirements,

"It’s important to us that US Water’s integrated approach to finding customised solutions for its customers has resulted in exceptional customer retention that exceeds 90 percent and produces consistent recurring revenues."

US Water founder and CEO Allan Bly said, "This combination will provide a platform for long-term success and growth for our company and employees.

"US Water’s management team is expected to remain in place, as will the company’s St. Michael, Minn. headquarters."