Advanced Drainage Systems Acquires Infiltrator Water Technologies

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Advanced Drainage Systems Inc. (ADS) — a leading global manufacturer of water management products and solutions for commercial, residential, infrastructure and agricultural applications — has announced the acquisition of Infiltrator Water Technologies for $1.08 billion from an affiliate of the Ontario Teachers’ Pension Plan and other stockholders. Infiltrator is a leader in onsite septic wastewater treatment. 

“We are very excited to be joining forces with Infiltrator, a company we know well and have worked with over the years as one of our longstanding strategic partners,” says Scott Barbour, president and CEO of ADS. “Infiltrator is a natural fit for us and for our customers, aligning closely with our growth strategies while accelerating the key drivers of our three-year plan — sales growth, margin expansion and cash flow generation — that we announced at our Investor Day last year. 

Barbour says the acquisition will allow the companies to offer an enhanced suite of water management solutions to a broader set of customers and expand its addressable opportunity in the onsite septic business.

“We are excited to execute on best practices across our businesses, particularly in innovation, operational excellence and recycling capabilities,” he says. “We look forward to working with the Infiltrator team to continue building on both companies’ strengths, as leaders in providing water management solutions for our customers.”

“This acquisition is a welcomed extension of our more than 15-year partnership built on mutual admiration and respect,” says Roy Moore, president and CEO of Infiltrator Water Technologies. “We have always shared a similar vision and core values, executed comparable conversion strategies to displace traditional materials, and remained committed to developing innovative, best-in-class products while maintaining a dedication to safety, operational excellence and sustainability through our recycling activities.

“We have appreciated our partnership with Ontario Teachers’ Pension Plan over the past four years, as we have executed against our value creation initiatives and are well-positioned for continued growth,” he adds.

Combination benefits

Infiltrator is a leading national provider of plastic leachfield chambers and systems, septic tanks and accessories, primarily for use in residential applications. Infiltrator products are used in onsite water treatment systems in the U.S. and Canada and generated approximately $275 million in revenue and $89 million in adjusted earnings during 2018. Infiltrator has been a longstanding supplier and customer of ADS for over 15 years.

This acquisition builds on ADS’ core strengths in water management by combining Infiltrator’s leading position in onsite septic wastewater management with ADS’ core stormwater-focused platform. The onsite septic business shares similar conversion dynamics to ADS’ core stormwater business, with plastic septic chambers and tanks gaining share at a fast rate.

The acquisition will add to the combined company’s distribution networks and increase availability of products to customers.

Lastly, the transaction brings together two companies committed to creating innovative water management solutions that preserve one of the planet’s most precious resources with a shared commitment to safety, operational excellence and sustainability. Infiltrator also brings significant recycled raw material sourcing capabilities, in both polypropylene and polyethylene, with 75% of its collective products sourced from recycled resin, which equates to approximately 150 million pounds of recycled plastic annually.

Transaction details

Under the terms of the agreement, ADS paid a purchase price of approximately $1.08 billion, subject to various closing and post-closing adjustments. The company has initially funded the transaction with drawings under a Senior Secured Credit Facility arranged by Barclays and Morgan Stanley Senior Funding, Inc. The company expects to refinance the Senior Secured Credit Facility through a combination of opportunistic capital markets transactions.

On a pro forma basis for the company’s fiscal year ended March 31, the combined companies would have had revenues of approximately $1.6 billion, adjusted earnings before interest, tax, depreciation and amortization (EBITDA) margins of approximately 20.4%, and free cash flow conversion of nearly 50%.

Barclays and Morgan Stanley & Co. acted as financial advisors to ADS; Squire Patton Boggs acted as legal advisor to the company; and Davis Polk acted as legal advisor to the ADS board of directors. RBC Capital Markets and Deutsche Bank Securities Inc. acted as financial advisors, and Kirkland & Ellis acted as legal advisor to the Ontario Teachers’ Pension Plan.


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