Sun Capital exits Aclara in $1.1 bln sale after three-year hold

Sun Capital Partners is exiting Aclara Technologies LLC after a three-year hold.

Hubbell Power Systems Inc said Dec. 26 it would buy Aclara for $1.1 billion. The St. Louis company provides smart meters and other field devices to more than 800 water, gas and electric utilities. Aclara, employing about 1,200, produces adjusted EBITDA of $90 million on revenue of $500 million. The sale to Hubbell is expected to close in late Q1.

Aclara’s technology allows utilities to communicate as “much as possible” with meters and obtain an accurate record of consumption, said Dan Florian, a Sun Capital managing director. No job cuts or management changes are expected, he said.

Aclara represents a combination of five carveouts. The original deal, in 2014, saw Sun acquire Aclara from Esco Technologies. The deal was valued at $150 million, according to the Wall Street Journal.

The company, which then employed 450, didn’t make the meters but provided the technology that enabled utility customers to communicate with them. Acalara also didn’t have the strongest leadership when Sun acquired it and hadn’t innovated in years, Florian said. “We viewed [Aclara] as a business with significant upside,” he said.

Sun brought in Allan Connolly, the former chief operating officer of water company Culligan, to serve as CEO. A year later, in 2015, Aclara bought the meters it was missing when it acquired the global electric meter business of GE. The deal strengthened Aclara’s position in the North American metering market, according to Greentech Media.

In August 2016, the company added grid sensors when it scooped up the smart grid business of Tollgrade Communications.

Two more deals came in 2017. In January, Aclara bought the Smart Grid Solutions division of Apex CoVantage. Aclara also bought GE’s majority stake in its joint venture, General Electric Philippines Meter & Instrument in August. That company provides electric meters in the Philippines.

The five deals, plus investments in R&D and new products, helped boost Aclara’s EBITDA by 5x, Florian said. The number of employees has also more than doubled. “We took a business with untapped potential and brought [Aclara’s] potential to bear,” he said.

Sun Capital put Aclara up for sale earlier this year, sending out books in September. The competitive process saw corporates, SPACs and private-equity firms bidding, Florian said.

Sun Capital signed the deal to sell Aclara on Dec. 22, he said. “We think Hubbell will have a successful go with the business,” he said.

Sun Capital used its latest flagship, Fund VI, to invest in Aclara. Sun Capital Fund VI closed on $2.1 billion in 2014.

Florian wouldn’t disclose how much of Fund VI is invested. He also wouldn’t disclose how well Sun Capital did on Aclara. Based on Sun Capital’s initial $150 million investment in Aclara, the $1.1 billion sale represents a roughly 7x return. The sale to Hubbell was a “very successful deal,” Florian said.

JP Morgan Securities, B of A Merrill Lynch, and HSBC Securities (USA) are providing bridge financing.

JP Morgan Securities served as financial adviser to Hubbell, while Wachtell, Lipton, Rosen & Katz acted as legal counsel.

Lawrence Steyn of Morgan Stanley and Joseph Mowery of Stephens were financial advisers to Aclara, and Morgan, Lewis and Bockius served as legal counsel.

Action Item: Contact Dan Florian at dflorian@suncappart.com

Photo of electric meters found in residential and commercial business courtesy of onurdongel/iStock/Getty Images