Three and a half years ago, Itron Inc. proved that it wasnt afraid to take big bites when it agreed to spend $255 million to buy Schlumberger Electricity Metering, a leader in the North American electric meter market.


Now, in a move that makes that acquisition look like an appetizer, the Liberty Lake-based maker of utility-meter reading technologies says its sinking its teeth into a $1.6 billion deal that will make it a world leader in utility meters and meter-reading equipment.


Acquisition of Actaris Metering Systems, the Luxembourg-based company that Itron is buying, not only will double Itrons annual revenues, it will give the Liberty Lake company 6,000 employees in addition to its current 2,500 workers, nearly 30 additional manufacturing facilities worldwide, and expanded product offerings. The sale is expected to close in the second quarter.


I think its notable that a company from Spokane can grow from an outgrowth of a local utility company to become what is without question the largest supplier in the world for electricity meters, says LeRoy Nosbaum, Itrons chairman and CEO. The real add is the huge presence we will have outside the U.S.


Actaris formed in 2001 through a leveraged buyout of another Schlumberger unit, this one called Schlumberger Resource Management Services, which, like Schlumberger Electricity Metering, was a unit of Houston-based Schlumberger Ltd., a big global oilfield and information-services company. Actaris is a world leader in the design and manufacture of meters and related systems for the electricity, gas, water, and heat markets. It has operations in 60 locations in more than 30 countries, including Russia, China, India, Indonesia, Australia, South Africa, Argentina, and a host of European countries.


The company says it has an installed base of about 300 million electricity, gas, and water meters around the world. Its clients include public and private energy and water suppliers, utility services, and industrial companies.


In 2006, Actaris had revenues of about $1 billion, compared with Itrons roughly $644 million in revenues, Nosbaum says. Itron expects the acquisition to boost its 2007 earnings by 20 cents to 30 cents a share, and its revenues by about $730 million, giving it total revenue of $1.4 billion this year, he says. Its customer base will grow from nearly 3,000 utilities to more than 8,000 utilities.


John Quealy, a Boston-based research analyst for Vancouver, B.C.-based Canaccord Adams who watches Itrons stock, says the acquisition is complementary because of the minimal overlap between the two companies geographical focus and product offerings. While Itron is the leading meter-reading technology provider in North America, Actaris is an internationally-focused meter supplier.


Itron bought Actaris for geographical and technology opportunities, Quealy says. What we see is the ability of Itron to integrate its advanced metering technology into the standard product base of Actaris, and that base is immense.


In addition, since the two companies share a common tie with the Schlumberger units and their core leadership teams have worked closely together in the past, the merger will be a good cultural fit and result in a smoother integration, Quealy asserts.


Theres been a lot of acquisitions and strategic movements in the advanced metering group in the past year or so, and Itron has been very calculated in its approach in who would be the best partner, Quealy says. Actaris is one of the best partners they could have identified.


On Feb. 27, the day after Itron announced the acquisition, its stock rose $3 a share to close at $66.81. While the companys stock fell a bit as the market melted last week, Quealy says he expects the merger will significantly boost Itrons stock in the future.


It was the absolute right target, and the market is applauding them for that, he says. Of Itrons stock-market performance on Feb. 27, he says, It gave an indication of what investors saw in the potential here.


Currently, only about 7 percent of Itrons business is international, so in addition to expanding the companys product base to include gas and water meters, the acquisition also will give Itron greater access to international markets for its automatic meter-reading and advanced metering infrastructure technologies, software, and systems expertise, Nosbaum says. Itrons meter-reading technologies enable utilities to collect meter data remotely.


The idea of providing utilities and their customers with more information is just beginning to gain steam in the rest of the world as utilities become more focused on conservation, Nosbaum says. This provides Itron a platform for growth in the future.


Itron and Actaris will continue to operate independently, so only a handful of jobs will be added in Spokane over time, he says. The deal will mean, though, that Itron will have added management responsibility over significantly more employees and the operation of 29 additional factories and 45 more sales offices worldwide.


To help finance the acquisition, Itron recently sold more than 4 million shares of common stock at $57.50 per share in a private placement to 10 institutional investors, giving the company gross proceeds of about $235 million, before fees and other expenses. In addition, the company will use $325 million in cash on hand for the acquisition, says Deloris Duquette, vice president of investor relations and corporate communications. The rest of the acquisition cost will be financed through nearly $1 billion in bank debt, Duquette says. Itron had $469 million in debt as of Dec. 31, before agreeing to the transaction, she says.


Its a goodly piece of debt on our books, Nosbaum says. Were well within the capability to pay down debt we are incurring with the acquisition.


Itron is a publicly held company that Avista Corp., then called Washington Water Power Co., formed in 1977 and later spun off as an independent entity. Its headquarters are located in the 200,000-square-foot former Telect Inc. building in Liberty Lake, and it has three manufacturing plants and nine offices worldwide.


Contact Emily Brandler at (509) 344-1265 or via e-mail at emilyb@spokanejournal.com.