Purchase makes Itron industry leader – Spokane-based company will have 50 percent of market

Itron makes electronic communications equipment that is installed in utility meters, allowing them to be read automatically from afar.

Alison Boggs
Staff writer Spokesman Review

On Thursday, the Spokane Valley company paid $255 million for one of the biggest meter manufacturers in the country. The move will complement Itron’s business and boost its market share to about 50 percent, company officials announced.

"We see this acquisition as a giant step forward for Itron," said CEO and chairman LeRoy Nosbaum, in a teleconference with analysts Thursday morning. "It makes Itron more meaningful in the minds of our utility customers around the world."

Itron is acquiring South Carolina-based Schlumberger Electricity Metering, which has about 3,400 utility customers and 35 million meters installed in North America. That’s about 30 percent of all the meters in use.

Itron, which has about 2,800 customers worldwide, has no immediate plans to add jobs in Spokane due to the acquisition. However, an Itron spokeswoman said the move will benefit the region.

"This makes Itron a much bigger company. We will be able to reinvest and grow the business, which obviously will be good for Spokane in the long term," said Mima Scarpelli, vice president of investor relations and corporate communications.

Itron is going into debt to purchase Schlumberger’s electricity metering business, which has 1,000 employees worldwide. Bear, Stearns and Co. advised Itron and provided the financing for the acquisition. Nosbaum said Itron is comfortable taking on the debt because interest rates are the lowest they’ve been in years and the cash flow of the combined companies is expected to be strong. Schlumberger had revenues of $229 million in 2002.

Nosbaum said the growth rate in the market for electricity meters has historically hovered around 3 percent, driven by replacement sales and housing starts. However, increasing interest in automatic meter reading has more than doubled that growth rate in each of the last few years, he said.

"In light of what is a tough year for utility spending, Itron is having a very good year," he said. Itron also released its midyear earnings report Thursday, showing a 15 percent increase in revenues over the first half of last year.

Second quarter revenues were $80.3 million, up $7.8 million or 11 percent over the same quarter last year. Revenues for the first half of the year were $155 million, up $20.4 million from the same time period last year.

The company’s earnings report attributed the growth primarily to higher sales of its automatic meter reading equipment.

The acquisition of Schlumberger is expected to close in the third or fourth quarter of 2003, pending approval under the Hart-Scott-Rodino Antitrust Improvement Act. Scarpelli said Itron is confident the acquisition will be cleared, despite the large market share the company will hold.

Itron began as a subsidiary of Washington Water Power, now called Avista Corp. A foreman for Avista Utilities, which uses both Itron and Schlumberger’s products, called the deal "a real interesting merge."

" (Itron) has always had to go to a meter manufacturer to have their product installed," said Dick McCarthy, foreman for Avista Utilities electric meter department. "Now they’ll be able to do the total package."

McCarthy said Avista buys meters from several companies now, but is likely to increase the amount it purchases from Schlumberger, following its acquisition by Itron.

"I think we’ll be closer with the Schlumberger people because of that connection," McCarthy said.

•Business writer Alison Boggs can be reached at (509) 927-2150 or at [email protected].

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