Smart meter maker Landis+Gyr eyes takeovers to double revenue

Tue May 27, 2014 11:30am EDT

* Landis+Gyr to spend more than $1 billion on takeovers

* EU regulation drives massive meter investments

* Efficiency gains, lower costs pushes rollout worldwide

* French 5 billion euro project attracts bidders

By Geert De Clercq

PARIS, May 27 (Reuters) - Landis+Gyr, the world's biggest maker of power meters for utilities, plans to more than double its revenue to $4 billion through a series of takeovers as it seeks to benefit from a global investment drive in smart meters.

Chief Operating Officer Richard Mora said the Switzerland-based firm, which had revenue of $1.51 billion in 2013, wants to buy companies specialising in power metering and networks.

"We aspire to be a company with $4 billion in revenue by 2020 and we will do this through organic (self-generated) growth and acquisitions," Mora told Reuters.

He did not say how much the group plans to spend, but if half its planned growth came from takeovers and at a modest price/sales ratio of 1, the firm would spend more than 1 billion dollars acquisitions. In 2011, Japan's Toshiba Corp bought Landis+Gyr for $2.3 billion, or 1.5 times sales.

Mora said Toshiba is willing to fund further expansion.

"If there is a compelling case, they are ready and willing to allow us to make the investments," he said.

Mora said Landis+Gyr's acquisition of unlisted optical sensors maker PowerSense earlier this month for an undisclosed sum was an example of the kind of acquisitions it is seeking.

Spun off by Denmark's Dong Energy A/S, PowerSense's products allow utilities to inspect power cables and measure things like drops in voltage. "We have the market penetration," he said. "What we are looking to buy is technology."

Founded in Zug, Switzerland at the end of the 19th century, Landis+Gyr has 5,000 staff worldwide and works with over 3,500 network operators and utilities.

Long a staid business making power meters for households as well as factories and utilities, the metering business has seen fast growth in recent years as technological advances allow meters to do more than just record how much power is used.

HUGE OPPORTUNITY

Unlike the electromechanical meters with spinning wheels still present in many European homes, smart meters give real-time consumption data and eliminate costly meter reading visits. But their introduction is in many instances being held back by discussions about who will pay - the utilities or their clients.

Excluding China, where foreign meter-makers have limited access, Mora estimates there are about 1 billion electric power meters in the world - some 200 million of them in Europe, 120 million in the United States and 90 million in Japan.

Landis+Gyr claims a global market share of about 30 percent, with 300 million metering points, of which about 25 million are smart meters, mostly in the United States where it has 23 million installed.

"We are betting that smart grids will develop in Europe, the Middle East and Africa, in Asia-Pacific and in South America. The opportunity is huge," Mora said.

In Europe, where a European Union directive requires 80 percent of households to have smart meters installed by 2020, penetration stood at 22 percent at end-2013 and is expected to rise to 60 percent by 2019, according to a Berg Insight report.

Berg estimates Europe will spend some 16 billion euros ($21.8 billion) to install 110 million of the devices between 2011 and 2017, or between 140 and 240 euros per meter.

For meter makers like Landis+Gyr, U.S.-based groups Itron and Sensus, Germany's Elster, General Electric and Echelon, this is the opportunity of a lifetime.

One of the biggest prizes will be France, whose government last year approved a plan to install 35 million smart meters between 2016 and 2020.

At about 30 euros per meter and 120 euros for installation, the replacement of the old meters will cost EDRF - the power distribution arm of utility EDF - more than 5 billion euros, to be financed by productivity gains.

Following a test phase with 300,000 meters installed in the cities of Lyon and Tours, France has opened a tender for the first 3 million devices.

Several suppliers, including Landis+Gyr, Itron and Britain's Iskraemeco - which supplied meters for the Lyon-Tours pilot - are in the running. French-based Sagemcom, owned by the Carlyle group, Elster, Siemens and Spain's ZIV may also bid.

"We are hoping for a share of that," Mora said. ($1 = 0.7325 Euros) (Editing by David Holmes)