Report: Smart Meter Giant Elster for Sale, Seeking $2B

The Wall Street Journal cites sources who say Elster may follow fellow metering giant Landis+Gyr into a multi-billion dollar corporate acquisition.

The smart grid acquisition sector is heating up, with the latest rumors swirling around smart meter giant Elster. The Wall Street Journal reported Wednesday that the German electric, gas and water metering giant is up for sale by majority owner CVC Capital Partners, which is seeking up to $2 billion.

CVC, which bought the Essen, Germany-based conglomerate from German utility E.ON in 2005 and took it public in 2010, holds about 62 percent of the company’s shares, according to the WSJ report, which cited anonymous sources on the proposed sale. Elster representatives declined to comment Wednesday.

Elster is the second “Big Five” smart meter company to be named as a rumored acquisition candidate in the past six months. In November, Reuters reported that Raleigh, N.C.-based smart meter maker Sensus was exploring a sale to a strategic partner or private equity firm and seeking about $800 million to $1 billion.

Last year, an even bigger smart meter contender, Swiss-based Landis+Gyr, was sold to Toshiba for $2.3 billion by the private equity firm Bayard Capital, which bought the company in 2004. As for Elster, the WSJ reported that potential bidders could include Siemens and ABB.

Analysts were quick to jump on the possibility of more acquisitions in the smart meter space, laying out Itron and Echelon as potential targets. Whether or not potential buyers like ABB and Siemens would want to buy a smart meter company is far less clear, however.

General Electric is the remaining smart meter vendor in the “Big Five” list of companies, which collectively dominate smart meter deployments in North America and Western Europe. Other regions have their own players -- China, in particular, has a host of incumbents, though U.S. and European firms are busy partnering up with them. The same holds true in Brazil, South and Central America and much of Asia. 

All of these meter makers are working with networking startups like Silver Spring Networks, Trilliant, SmartSynch and Tropos Networks, which offer enhancements on the wireless networking provided by the smart meter makers themselves. Meter data management software is another area where smart meter vendor systems share the field with stand-alone solutions from the likes of eMeter, Ecologic Analytics, Oracle and others.

Notably, this list includes a lot of companies that have been acquired in the past year or so. Tropos was bought by ABB this month for an undisclosed sum, giving the Swiss grid giant a host of U.S. smart meter-smart grid projects. SmartSynch, which uses cellular networks to hook up smart meters, was bought by Itron for $100 million in March. On the MDMS front, both eMeter and Ecologic Analytics were acquired late last year, by Siemens and Landis+Gyr/Toshiba, respectively.

As for Elster, it has fallen behind its competitors in U.S. smart meter deployments, though it has also been growing its business in Europe, South America and Asia. It reported net income of $100.88 million on revenues of $1.87 billion last year, up from $87.26 million on revenues of $1.76 billion in 2010 and $48.9 million on revenues of $1.69 billion in 2009.

Like its smart meter competitors, Elster is branching out into broader smart grid applications. GTM Research smart grid analyst Ben Kellison notes that Elster has a distribution networking partnership with Eaton, which announced plans to acquire Cooper Industries for $11.8 billion last month, putting it in the ranks of ABB, Siemens, Schneider Electric and GE in terms of smart grid market heft.