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Landis+Gyr is on the auction block, and General Electric, Toshiba, Honeywell and ABB are rumored to be in the bidding.
Why the interest? Well, Landis+Gyr is the only one of the big five smart meter companies (the others are GE, Itron, Sensus and Elster) that’s for sale. It has earned about $200 million on about $1.5 billion in annual revenues in the past year, anonymous sources from Reuters report. That puts a $2 billion–plus price firmly in the realm of long-term investment. Buyers looking for a quick moneymaking turnaround are out, but strategic buyers could squeeze a lot more value out of L+G by integrating its existing technologies and utility projects into their own lines of business.
Whoever buys Landis+Gyr will be getting the company’s extensive smart metering and distribution grid management technology to work with, and its extensive roster of moneymaking projects. That’s a sweet plum for any smart grid company, and there have been plenty of big acquisitions in the space lately to show that giants in the field are willing and able to spend to extend their market share and their reach across different sectors of the industry.
Let’s break it down by (rumored) buyer:
General Electric: In late April, Reuters reported that General Electric was offering $2 billion for the Swiss-based smart metering giant. True, GE already has a smart meter business, but right now the company relies on a host of partners for communications and networking, such as Silver Spring Networks, in Pacific Gas & Electric territory, or Grid Net, the champion of WiMAX and LTE, in pilot projects in Australia and the United States.
If L+G became part of the GE empire, the latter could stop just churning out smart meters like widgets and start supplying a more holistic offering to utilities. That could give GE deeper revenues from its smart meters on the all-important IT and services side of the utility contract equation.
A Bloomberg report released a few days after the Reuters report cited a confidential source saying that GE had withdrawn its bid. But a well-placed venture capital source told me last week that his understanding is that GE will pay any price necessary to get L+G for itself.
Toshiba: In early May, Reuters reported that Toshiba had placed a $2.48 billion counteroffer to GE’s. Besides being one of the silent giants in nuclear power, Toshiba is a huge player in power and grid systems and ought to be included with Mitsubishi and Hitachi on every “grid giants” list out there.
But Toshiba hasn’t publicized much about work on smart meters or technologies to serve its communications and networking needs. So why would Toshiba want L+G? Perhaps it’s mainly seeking to grab the metering giant’s extensive list of utility and grid customers, as some analysts have speculated. Or perhaps Toshiba wants L+G’s smart metering technology to compete against partnerships like the one linking Hitachi’s grid systems with Panasonic’s in-home energy systems.
Honeywell: The buildings control giant has been getting into submetering buildings via its acquisition of E-Mon, as well as demand response via Akuacom. It’s also a granddaddy in home energy management, from programmable thermostats to next-generation home energy control via partner EnergyHub. The key bottleneck remains the smart meter–home link — only a handful of the smart meters capable of networking with in-home devices have been turned on to do so as of yet. Those include Landis+Gyr’s smart meters being deployed in the fast-moving, deregulated Texas market by utilities like Oncor. That may have given the company a head start in smoothing out the wrinkles inevitable in early-stage home area network (HAN) deployments.
As for ABB, it’s a grid giant in everything but meters, and has been buying smart grid companies like crazy in the last year. Enough said.
Right now, GE looks as though it has the most to gain from a Landis+Gyr acquisition. What are your thoughts, and are there other bidders that might emerge with even better rationales for spending $2 billion plus on the deal?