Spokane, WA, January 21, 2003 — Itron Inc., a technology provider and source of knowledge to the global energy and water industries, announced Tuesday that it has signed a definitive merger agreement to acquire Silicon Energy for a total consideration of $71.2 million.
The transaction is expected to close by the end of February 2003. Silicon Energy, privately-held and based in Alameda, Calif., provides enterprise energy management solutions that enable utilities, energy service providers, governments, and commercial and industrial energy users to efficiently manage and apply energy consumption data, optimize the delivery and use of energy, mitigate risk, control energy costs, and optimize energy procurement.
Silicon Energy’s software enables utilities to streamline the process of collecting, validating, and warehousing meter information; calculate and validate bills; optimize distribution assets; improve customer service; and manage peak demand.
For large commercial and industrial energy users, Silicon Energy software leverages billing, metering, production and weather information from multiple, geographically dispersed sources to forecast and budget energy consumption, allocate costs, and control overall energy demand and costs. In addition to software, Silicon Energy offers a comprehensive selection of professional and support services to its installed customer base.
“Itron’s vision is to optimize the delivery and use of energy and water by leveraging our core competencies in products and services for advanced meter data collection, and our rich history of marketing and selling to electric, gas and water utilities,” said LeRoy Nosbaum, Itron Chairman and CEO.
“This acquisition is the latest, and a significant step in our moves to fulfill that vision. With the addition of Silicon Energy, Itron will be able to offer an integrated knowledge platform that makes it easy for our customers to gather, manage and exchange relevant data within the utility and between utilities and their customers.”
Silicon Energy’s solutions are already integrated with Itron’s MV-90 software systems at the majority of Silicon Energy’s 20 utility customers. Itron’s MV-90 software is used by more than 500 utilities in the United States to collect usage and event data from commercial and industrial metering points.
Nosbaum added that, “Silicon Energy brings to Itron access to markets we do not currently call on such as commercial and industrial end users, government, and higher education. These large energy users account for over $160 billion of the energy consumption in the United States annually. Reducing their energy costs by even a small percentage can result in a meaningful impact to their bottom line.”
Itron also announced Tuesday a reorganization of its Energy Information Solutions (EIS) product group in Raleigh, NC, which is responsible for product development and support activities for MV-90. Nosbaum said that the EIS reorganization is driven by continued slow activity in the wholesale energy markets.
“A good portion of EIS resources over the past few years has been focused on custom data collection software for regional transmission organizations and other wholesale energy market participants,” said Nosbaum.
“We need to make adjustments in our EIS operations to refocus efforts on the utility and large energy user sector where the opportunities for growth are promising.”
Nosbaum indicated that approximately 40 positions in Raleigh would be cut and that most employees were being notified today.
Nosbaum said that Itron intends to combine Silicon Energy’s operations with those of EIS and RER, Itron’s recently acquired energy consulting, analysis and forecasting services and software business, to form a new product group, Energy Management Solutions, and that John Woolard, Silicon Energy’s president and CEO, will become vice president of that group. Silicon Energy’s Alameda offices will remain open following the merger and there will be some transfers of personnel between Alameda and Raleigh.
“John co-founded two successful startups before Silicon Energy and brings significant software sales, product development, and general management experience to Itron as well as significant depth in the energy sector. I am convinced there is no one better qualified to help us capitalize on the growth opportunities in this area.”
“Itron and Silicon Energy each have complementary components for delivering a comprehensive enterprise energy management solution, but neither of us offer a total package,” said Woolard.
“By combining our two companies, we will be able to provide truly integrated and scalable technology that allows both utilities and large energy users to meet the dynamic and ever increasing challenges of managing a real-time commodity such as energy. I am looking forward to joining a company that is uniquely positioned to combine industry leading data collection technology with a software architecture that allows for true enterprise-wide management of this complex problem.”
About the Silicon Energy acquisition:
“- The $71.2 million in consideration includes payment for the outstanding shares of stock, repayment of approximately $4.2 million in convertible debt, and other consideration.
“- Itron expects to finance the purchase with cash and a $50 million term bank loan, payable over three years.
“- The transaction has been approved by both Itron’s and Silicon Energy’s Board of Directors and is subject to Silicon Energy stockholder approval, finalizing loan arrangements, the Hart-Scott-Rodino process, and other customary closing conditions.
Impact of the transaction and EIS restructuring on 2003 financial results:
“- The acquisition is expected to result in additional revenues of approximately $15 million in 2003 for the portion of the year Silicon Energy is part of Itron.
“- The acquisition will be accounted for under the purchase method of accounting. While valuations are still being finalized, Itron expects that the majority of the purchase price will be allocated to intangible assets and goodwill, resulting in increased intangible asset amortization expense in 2003. Itron expects 2003 restructuring charges of approximately $2 million, primarily related to workforce reductions in Raleigh.
“- Excluding the additional intangible amortization, and restructuring charges, and including the interest expense associated with the term bank debt, the acquisition is expected to be minimally dilutive to 2003 proforma EPS.
About Itron: More than 2,000 utilities worldwide rely on Itron technology to deliver the knowledge they require to optimize the delivery and use of energy and water.
Itron delivers value to its clients by providing solutions for meter data collection, energy information management, demand side management and response, load forecasting, analysis and consulting services, transmission and distribution system design and optimization, web-based workforce automation, C&I customer care and residential energy management. For more information visit Itron’s website at www.itron.com.