Itron’s acquisition of Silver Spring Networks should strengthen its position as a leading smart grid and smart city technology provider.
Itron has been steadily expanding its capability over the past few years for the new hyperconnected Internet of Things (IoT) era that we are entering.
From a utility metering provider, Itron has evolved into the smart grid marketplace. And with utility services such as energy and water core to society’s wellbeing and development, the next stop is the smart city.
With its OpenWay Riva platform built on the concept of intelligence at the grid edge and an app-based ecosystem – and by extension any connected intelligent device – Itron has been developing the underlying IT infrastructure for this expansion. But beyond its core electricity, gas and water utility technologies, the company has yet to become a significant smart city player.
It is also of a different scale, coming at a cost of about $830m – the Comverge deal was worth about $100m – a sum that will be underwritten by Wells Fargo bank.
According to a statement this represents a premium of 25% to Silver Spring's closing share price on 15 September, which was the last trading day prior to the announcement of the acquisition.
While a competitor to Itron, the younger Silver Spring Networks – founded in 2002, compared to Itron’s 1977 – has evolved on a somewhat different path, focusing more on the networks and growing the applications of its technologies through partnerships with other providers (Itron among them).
The acquisition will therefore add a new dimension to Itron, with the prospect of enabling the company to fulfil the IoT ambitions which will support its growth and expansion into the future.
“The addition of Silver Spring brings more capabilities to our offerings and advances our strategy of delivering highly secure, value-generating solutions for the critical infrastructure within utilities, smart cities and the broader industrial IoT sector,” says Philip Mezey, Itron's President and CEDO in a statement.
“By converging our complementary, standards-based technologies, we will enhance customer efficiencies with solutions that optimise devices, network technologies, outcomes and analytics.”
The company can count on more than 90m smart endpoints globally from the combined customer bases.
Itron anticipates approximately $50m in annualised cost synergies within three years of completing the transaction by optimising combined operations and expenses.
The IoT market opportunity is estimated at $470bn by 2020.
Industry opportunities. (Source Itron.)
1. US Energy Information Administration; 2 . Markets and Markets research; 3. Navigant Research; 4. Itron
Mike Bell, President and CEO of Silver Spring Networks, says in the same statement: "Joining forces with Itron will enable us to help more utilities and cities adopt the industrial internet, improve their performance and reliability, and better position themselves for a connected future.”
According to the statement, other benefits of the acquisition will include streamlined solutions built on complementary technologies, more outcome-based solutions and accelerated innovation with the combined company’s strong engineering talent and deep data domain expertise.
“Combining Silver Spring's entrepreneurial culture and proven capabilities with Itron's operational strengths, depth of solutions and customer intimacy will result in a company that is well-positioned in the fast growing critical infrastructure space,” Mezey promises.
The Itron name will continue as the company level brand, while product and service branding will be reviewed during the integration of the two companies.
The acquisition has been approved by the boards of directors of both companies but still requires the approval of Silver Spring's stockholders as well as the standard regulatory approval.
It is expected to close in late 2017 or early 2018.