water quarterly newsletter 2020-04-21آ  water quarterly newsletter spring 2020 information...

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  • WATER QUARTERLY NEWSLETTER

    1

    IN THIS ISSUE

    Deal in Focus: Desalitech Acquired by

    DuPont

    Overview of the European Water

    Market

    COVID-19 and the Water Sector

    Sector and Economic Indicators

    RJ’s Global Water Team Expansion

    Trading and M&A Comparables

    Water Quarterly Newsletter Spring 2020

    Information obtained from third-party sources is considered reliable, but we do not guarantee that the information herein is accurate or complete. This report was prepared within Raymond James &

    Associates' Investment Banking Department and is for information purposes only. This report is not a product of Raymond James & Associates' Research Department; recipients of this report should

    not interpret the information herein as sufficient grounds for an investment decision or any other decision. The report shall not constitute an offer to sell or the solicitation of an offer to buy any of the

    securities mentioned herein; past performance does not guarantee future results. The information in this material is based upon any management forecasts supplied to us and reflects prevailing

    conditions and our views as of this date, all of which are accordingly subject to change. Our analyses are not and do not purport to be appraisals of the assets, stock, or business of the Company or

    any other entity. © 2020 Raymond James & Associates, Inc., member of New York Stock Exchange/SIPC.

    RJ Water

    welcomes two

    new bankers in

    Europe – bios

    on page 15

    within

  • WATER QUARTERLY NEWSLETTER

    2

    Your success is our business.

    Informed Advice.

    Quality Results.

    Learn how our deep industry expertise and commitment to each

    transaction can help you achieve your business objectives.

    Companies developing and utilizing creative solutions to help solve the world’s growing water problems can turn to

    the Raymond James Water team for results. The team’s expansive industry relationships and deep market insight

    allow us to provide comprehensive service to our clients, particularly those addressing the industry’s biggest secular

    trends: water scarcity, water quality and aging infrastructure.

    As one of the only investment banking teams with a dedicated focus on the industry, you can expect informed

    advice and quality results.

    WATER QUARTERLY NEWSLETTER

    Transaction Represents

    Raymond James’ Industry-

    Leading 20th Water

    Transaction Since 2016

    January 2020

    Follow-On Offering

    $253,500,000

    Transaction Represents

    Raymond James’ Industry-

    Leading 21st Water

    Transaction Since 2016

    has been acquired by

    March 2020

    CLANCEY CROWLEY

    Vice President

    Americas Water

    +1 212.885.1821

    clancey.crowley@raymondjames.com

    BRENDAN TIERNEY

    Managing Director

    Global Head of Water

    +1 212.856.4387

    brendan.tierney@raymondjames.com

    ADAM GRAVITT

    Associate

    Americas Water

    +1 212.883.6595

    adam.gravitt@raymondjames.com

    FLORIAN STOEGER

    Director

    European Water

    +49 69.21.93.3722

    florian.stoeger@raymondjames.com

    ALASTAIR ROGERS

    Managing Director

    European Sustainability

    +44 0.203.798.5744

    alastair.rogers@raymondjames.com

  • WATER QUARTERLY NEWSLETTER

    3

    Global Water Intelligence

    recognized the sale of

    Desalitech to DuPont as the

    second-best exit valuation for

    the 2010s

    • Founded in Israel and headquartered near Boston, MA, Desalitech

    provides the most advanced closed circuit reverse osmosis (“CCRO”)

    systems on the market

    • The Company’s systems save more water and energy, are easier to

    use, are more flexible and reliable, and operate at a lower cost than

    competing solutions

    • The CCRO systems are capable of delivering up to 90-98 percent

    water recovery with its single-stage configuration at much greater

    reliability compared to traditional three-stage RO systems

    • Desalitech sells RO systems into U.S. industrial and municipal end

    markets and earns licensing revenue from overseas customers

    • The Company’s solution has applications in process water, ingredient

    water, pure water supply, boiler and cooling tower make up, PFAS

    removal, wastewater reuse, and brackish water desalination

    • Desalitech possesses a diversified, blue-chip customer base with over

    200 systems installed to date

    • The Company has recently added remote monitoring (ReFlex Smart)

    services through its integrated mobile application, facilitating operation

    of its systems

    RATIONALE

    FIRST QUARTER DEAL IN FOCUS: DESALITECH ACQUIRED

    BY DUPONT

    • On January 7th, 2020, DuPont Safety & Construction (“DuPont”), a

    segment of NYSE-listed DuPont de Nemours, Inc., finalized its

    acquisition of Desalitech (the “Company”), a provider of advanced

    closed circuit reverse osmosis systems, for an undisclosed amount

    • DuPont is a global provider of technology-based materials, ingredients,

    and solutions through its Electronics & Imaging, Transportation &

    Advanced Polymers, and Safety & Construction segments

    • The transaction in the high-growth water purification space reinforces DuPont’s strategic intent to provide a robust portfolio

    of technologies to meet its customers’ current and future challenges while advancing its corporate commitment to

    sustainability

    • Desalitech presents DuPont with the opportunity to work with OEMs, end users and value chain partners around the world,

    using business models such as technology licensing, system sales and fabrication partnerships to increase access to

    Desalitech’s CCRO technology

    • The acquisition enables Desalitech to have an exponentially greater impact on global water scarcity with many more

    partners and users able to access this efficient, resilient and flexible water purification and reuse technology

    TRANSACTION OVERVIEW

    COMPANY OVERVIEW

    Second-Best

    Exit Valuation

    Sources: Capital IQ, Global Water Intelligence, and Desalitech & DuPont websites and

    press releases.

  • WATER QUARTERLY NEWSLETTER

    4

    OVERVIEW OF THE EUROPEAN WATER MARKET

    The global water market, encompassing the expenditures

    for equipment and operations in the provision and

    distribution of water and the treatment of wastewater for

    municipal, industrial, agricultural and residential

    applications, is estimated to exceed EUR 750bn(1) per

    year. The European water market accounts for c. 20%(2)

    of the global market, or around EUR 150bn per year, and

    is expected to exhibit a growth of 100 to 200 basis

    points(3) above GDP growth. In the European Union, GDP

    growth has historically exceeded 2.0% and is forecasted

    to reach 1.4%(4) this year.

    European water market of EUR 150bn growing at

    100 to 200 basis points above GDP.

    With a share of around two thirds of the market, municipal

    utility expenditures are driving the European water

    market. This section of the market can be further divided

    into municipal capital and operating expenditures that

    amount to 40% and 60%, respectively. The remainder of

    the European water market is dominated by industrial

    capital and operating expenditures (c. 15%) as well as

    bottled water (c. 14%), point-of-use equipment (c. 2%)

    and irrigation equipment (c. 2%) (5).

    Market growth in Europe is driven by increasingly

    stringent regulation as well as a growing need to address

    the three dominating secular trends: aging infrastructure,

    water scarcity and water quality.

    THE EUROPEAN WATER MARKET Forecasts of municipal utility capital expenditures for

    water and wastewater infrastructure across Europe

    expect spending to exceed EUR 500bn between 2016

    and 2025. More than EUR 225bn of this investment will

    be dedicated to maintaining and expanding Europe’s 6.7

    million kilometers of aging and leaking pipe networks.

    Further regulatory developments may trigger further

    investment(7).

    AGING INFRASTRUCTURE

    Similar to other developed regions such as the United

    States, the European water infrastructure is among the

    oldest on the planet with many parts of the system

    exceeding their useful life of around 60 - 80 years. In fact,

    more than 60% of the water infrastructure across

    European nations is older than 40 years, creating an

    immediate need for maintenance and repair. In Germany

    for instance, more than 15% of the sewer network is older

    than 75 years and around 7% is older than 100 years(6).

    Most countries currently only rehabilitate around 1% of

    their network each year, an insufficient amount to keep

    the entire network in fully operational condition.

    Increasing urbanization across Europe is further putting

    pressure on infrastructure in already tarnished condition,

    further accelerating the rate of deterioration.

    More than 60% of the European water infrastructure

    is older than 40 years.

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