October 2002: Volume 44, Number 10
Pentair buys Plymouth Products, USFilter sells waterworks division; and the 8×8-oz. rule under fire
by Carlos David Mogollón, WC&P Executive Editor
Big news for those holding their breath to see how divestitures at Vivendi Environnement might affect the company’s POU/POE treatment operations. For one, Pentair Inc. stepped up in early September as the taker on the sale of Plymouth Products, which was put on the bidding block back in March just before the WQA New Orleans convention.
Plymouth was a subsidiary of USFilter’s USF Consumer & Commercial Water Group. It positions Pentair well as a more vertically and horizontally integrated water treatment equipment supplier, and will push sales at Pentair Water Technologies well over $1 billion. Now, industry watchers wonder if and when the components supplier might market its own brand of water treatment systems, considering Morton Salt just began selling two low-end consumer softeners through Wal-Mart stores in May. Likewise, in just two years, Osmonics introduced a household softener line for independent dealers under the AvantaPure brand, Clack began marketing its own custom label valve and Rainsoft-parent Aquion Partners acquired Erie Water Treatment Controls, giving it access to valve production. The only big players without such capabilities are Sta-Rite and Severn Trent Services. Is it just a matter of time? Check back with us later.
Meanwhile, in mid-September, USFilter announced the purchase of its waterworks distribution division. In an AP article Sept. 2 that discusses the Plymouth deal and other possible sales, we find Vivendi Universal’s stake in VE is actually 40.8 percent, a tad shy of the 42 percent announced this spring as it lowered its stake from a percentage range in the 60s (which was down from the 80s last fall). The buyers of USFilter’s waterworks division -- the leading U.S. distributor of pumps, pipe, hydrants, valves and meters -- were J.P. Morgan Partners and Thomas H. Lee Partners for some $620 million. No sales figures were mentioned for Plymouth, despite the fact both buyer and seller are publicly traded. One would assume it was for less than $400 million, considering USFilter president/CEO Andrew Seidel’s quote: “The execution of the Plymouth Products sale agreement keeps USFilter on track to meet its announced target to divest over $1 billion in non-core businesses during 2002.” Rumors persist since early this year that Culligan, which USFilter acquired in 1998, isn’t in the long-term picture for VE/USF either -- but company officials adamantly assert otherwise.
“Our driving force is recurring income… and Culligan certainly fits that mold,” said USFilter spokesman Jim Force.
Recent turbulence for the rumor mill even suggesting USFilter was for sale, Force added, came from a headline in a Bloomberg News story suggesting VE was selling its USFilter “equipment” supplier -- “waterworks” was inadvertently omitted. He noted a lot of the trial balloons floated on the corporate grapevine have to do more with confusion over “Vivendi Universal and (ex-chairman) Mr. Messier’s plight,” further distancing VE from its former parent company which recently suggested it may shed the remaining 42 percent it owns in VE. While VE, further distancing itself from its former parent company, wrote off $2.6 billion in March because of the falling value of assets (largely USFilter), Culligan is still seen as integral to its parent’s overall focus.
Seidel was more circumspect but frank on the issue, saying he felt it more important than ever to resolve ongoing conflict with the Culligan independent dealer network over franchise contract issues so the company can get all segments of its business working together for mutual benefit by year-end. He acknowledged missteps by Northbrook in taking a hard line early on in franchise negotiations. Now, though, he plans to get personally involved, to listen and to stress the point that market penetration in urban markets remains low and leveraging different sales channels will provide a sum-sum gain for all. Culligan dealers, with better brand recognition, Seidel added, will reap greater rewards than competitors. Currently, though, dealers are about the only USFilter segment experiencing less than double-digit growth.
Another lingering story this summer -- an attack on the idea that eight, 8-ounce glasses of water a day is the proper amount for healthy human hydration, known as the 8×8 rule. Not so according to a number of recent reports, the latest a Dartmouth study published in August. With CNN and Wall Street Journal reports knocking the rule in May and a bizarre July story about the death of three military recruits from 1999-2001 from drinking too much water, it was better than any scary summer blockbuster. The IBWA -- whose convention this month in Phoenix is highlighted in this issue -- was compelled to comment, referring to it as a “general guidance” recommended by the American Dietetic Association and National Academy of Sciences, not an IBWA invention.