Advanced Drainage Systems acquires Orenco Systems

HILLIARD, Ohio - Advanced Drainage Systems, Inc. (NYSE: NYSE:WMS), known for its water management solutions, announced the acquisition of Orenco Systems, Inc., a manufacturer of advanced onsite septic wastewater treatment products. The transaction is expected to close in the third quarter of fiscal 2025, subject to standard closing conditions.

This strategic move is anticipated to enhance Advanced Drainage Systems' growth in the advanced wastewater treatment sector, providing access to new opportunities in a segment characterized by fragmentation and rapid growth. Scott Barbour, President and CEO of Advanced Drainage Systems, highlighted the acquisition's alignment with the company's growth strategies and its commitment to innovation.

The acquisition is set to establish a premier provider of advanced wastewater treatment systems for both residential and non-residential use. The combined expertise and capabilities of both companies are expected to drive further market penetration and accelerate product development. The collaboration is also projected to yield operational efficiencies and expand the companies' scale and reach.

Advanced Drainage Systems and Orenco share a commitment to environmental stewardship, with a focus on sustainable water management solutions. The transaction brings together two companies with established reputations for safety, operational excellence, and sustainability.

Jefferies LLC and Squire Patton Boggs LLP advised Advanced Drainage Systems on the financial and legal aspects of the deal, respectively. Orenco was advised by Raymond James and Klehr Harrison Harvey Branzburg LLP.

Founded in 1966, Advanced Drainage Systems operates approximately 70 manufacturing plants and 40 distribution centers, and is one of North America's largest plastic recyclers. Orenco, established in 1981, has been at the forefront of designing and manufacturing innovative wastewater collection and treatment technologies.

This press release includes forward-looking statements regarding the acquisition's potential effects on Advanced Drainage Systems' business and operations. The company cautions that these statements are predictions based on current expectations and that actual outcomes may differ. This article is based on a press release statement.

In other recent news, Advanced Drainage Systems (ADS) reported its Q1 2025 earnings, with revenue meeting expectations and an impressive adjusted EBITDA margin of 33.8%. Despite heavy rainfall in the Midwest affecting agricultural sales, the company experienced robust demand across the construction market, particularly in the non-residential, residential, and infrastructure sectors. ADS is targeting expansion in the Texas market, the largest stormwater market in the U.S., and has obtained additional local approvals for its plastic products.

The company also highlighted a 4% growth in the residential market and a 6% increase in Infiltrator revenue. ADS reaffirmed its fiscal 2025 guidance, expecting revenue between $2.925 billion and $3.25 billion, and adjusted EBITDA between $940 million and $980 million.

These are recent developments that reflect the company's focus on sustainability efforts and adaptability to changing climates and regulatory requirements. ADS is considering potential acquisitions to bolster its active treatment business and is conducting an internal study to assess the influence of community standards on its products and services. Despite challenges, ADS remains optimistic about its long-term business prospects, driven by climate change patterns and regulatory demands for water management.

InvestingPro Insights

As Advanced Drainage Systems, Inc. (NYSE: WMS) gears up to integrate Orenco Systems, Inc. into its operations, the financial metrics and market performance of WMS become a focal point for investors. According to InvestingPro data, Advanced Drainage Systems boasts a market capitalization of $11.67 billion, underlining its significant presence in the water management industry.

The company's P/E ratio stands at 23.63, reflecting investor expectations of future earnings. However, this valuation comes with the consideration that WMS is trading at a high P/E ratio relative to near-term earnings growth, as indicated by an InvestingPro Tip. This could suggest that the market has already priced in the anticipated benefits from the acquisition of Orenco Systems.

Another InvestingPro Tip to consider is that Advanced Drainage Systems has a history of maintaining and raising dividends, which can be appealing to income-focused investors. The company has raised its dividend for three consecutive years and has maintained dividend payments for 11 consecutive years. This consistent return to shareholders could be a testament to the company's financial stability and commitment to delivering value.

Investors can find additional insights and tips on Advanced Drainage Systems, including further analysis of the company's debt levels and liquidity, by visiting the dedicated page on InvestingPro+: https://www.investing.com/pro/WMS. There are 13 additional InvestingPro Tips available, offering a comprehensive look at the company's financial health and market position.

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