EVOA WATEPAR Item 8.01 Other Events.
As previously disclosed, onJanuary 22, 2023 , Xylem Inc. ("Xylem"), anIndiana corporation,Fore Merger Sub, Inc. , aDelaware corporation and a direct, wholly-owned subsidiary of Xylem ("Merger Sub"), andEvoqua Water Technologies Corp. ("Evoqua"), aDelaware corporation, entered into an Agreement and Plan of Merger (as amended from time to time, the "Merger Agreement"), providing for the merger of Merger Sub with and into Evoqua, with Evoqua surviving the merger as a direct, wholly-owned subsidiary of Xylem (the "Merger"). OnMarch 9, 2023 , Xylem filed with theU.S. Securities and Exchange Commission (the "SEC") a Registration Statement on Form S-4 containing a preliminary joint proxy statement/prospectus of Xylem and Evoqua relating to the Merger. OnApril 11, 2023 , Xylem filed with theSEC a definitive joint proxy statement/prospectus of Xylem and Evoqua relating to the Merger (the "Xylem Proxy Statement/Prospectus"). Also onApril 11, 2023 , Evoqua filed with theSEC the same definitive joint proxy statement/prospectus relating to the Merger on Schedule 14A (the "Evoqua Proxy Statement"). Xylem and Evoqua have determined to voluntarily supplement and restate certain of the disclosures made in the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement with the information below. The information below should be read in conjunction with the information in the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement and you are urged to read the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement in their entirety. Nothing in this Current Report is or shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures provided hereby, taken individually or in the aggregate. To the extent that the information set forth herein differs from or updates information contained in the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement, the information set forth herein shall supersede or supplement the information in the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement. All references to sections and subsections herein are references to the corresponding sections or subsections in the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement, all page references are to pages in the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement, and terms used herein, unless otherwise defined, have the meanings set forth in the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement. The supplemental disclosures to the definitive joint proxy statement/prospectus in this Current Report do not modify in any way the terms of the Merger, including the Merger consideration, or the timing of the Xylem Special Meeting (to be held virtually at www.virtualshareholdermeeting.com/XYL2023SM, onMay 11, 2023 , at11:00 a.m., Eastern Time ), or the timing of the Evoqua Special Meeting (to be held virtually at www.virtualshareholdermeeting.com/AQUA2023SM, onMay 11, 2023 , at11:00 a.m., Eastern Time ). The Xylem Board continues to unanimously recommend that Xylem shareholders vote "FOR" the Share Issuance Proposal and the Xylem Adjournment Proposal. The Evoqua Board continues to unanimously recommend that Evoqua stockholders vote "FOR" the Merger Proposal, the Advisory Compensation Proposal and the Evoqua Adjournment Proposal.
Supplemental Disclosures
OnMarch 13, 2023 , a purported Evoqua stockholder filed an action against Evoqua and the Evoqua Board captioned O'Dell v.Evoqua Water Technologies Corp. , et al., No. 23-cv-2122, in theUnited States District Court for the Southern District of New York (the "O'Dell Action"). The plaintiff in the O'Dell Action alleges that Evoqua and the Evoqua Board violated federal securities laws, including Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated under the Exchange Act, by issuing a materially incomplete and misleading preliminary proxy statement in connection with the Merger. OnApril 11, 2023 , another purported Evoqua stockholder filed an action against Evoqua and the Evoqua Board captioned Bushansky v.Evoqua Water Technologies Corp. , et al., No. 23-cv-3042, in theUnited States District Court for the Southern District of New York (the "Bushansky Action"), and onApril 20, 2023 , a third purported Evoqua stockholder filed an action against Evoqua and the Evoqua Board captioned Morgan v.Evoqua Water Technologies Corp. , et al., No. 23-cv-431, in theUnited States District Court for the District of Delaware (the "Morgan Action" and together with the O'Dell Action and the Bushansky Action, the "Actions"). The plaintiffs in the Bushansky Action and the Morgan Action allege that Evoqua and the Evoqua Board violated federal securities laws, including Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 -------------------------------------------------------------------------------- promulgated under the Exchange Act, by issuing a materially incomplete and misleading definitive proxy statement in connection with the Merger. The plaintiffs in each of the Actions seek, among other things, to enjoin the transactions contemplated by the Merger Agreement and an award of attorneys' and expert fees and expenses. Xylem and Evoqua believe that the allegations in the Actions are without merit. This information in this Supplemental Disclosures section of this Current Report on Form 8-K should be read in conjunction with the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement, which should be read in its entirety.
In the section Background of the Merger, following the third sentence of the fourth paragraph on page 73 of the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement, the following sentence is inserted:
Evoqua and the Evoqua Board believed that working with both Goldman Sachs and
In the section Background of the Merger, following the first sentence of the seventh paragraph on page 73 of the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement, the following sentence is inserted:
Evoqua did not enter into any non-disclosure agreements in relation to a potential strategic transaction with any parties other than Xylem and Party B.
In the section Opinions of Evoqua's Financial Advisors-Opinion of Evoqua's
Using the mid-year convention for discounting cash flows and discount rates ranging from 9.0% to 10.5%, reflecting estimates of Evoqua's weighted average cost of capital, Goldman Sachs discounted to present value as ofDecember 31, 2022 (i) estimates of unlevered free cash flow for Evoqua for the second through fourth quarters of fiscal year 2023 and for fiscal years 2024 and 2025 as reflected in the Evoqua Management Forecasted Financial Information Including M&A as described in the section titled "Certain Unaudited Forecasted Financial Information" beginning on page 118 of this joint proxy statement/prospectus and (ii) a range of illustrative terminal values for Evoqua, which were calculated by applying terminal year exit EV/EBITDA multiples ranging from 18.0x to 22.0x, to a terminal year estimate of the EBITDA to be generated by Evoqua of approximately$426 million , as reflected in the Evoqua Management Forecasted Financial Information Including M&A (which analysis implied perpetuity growth rates of 5.1% to 7.3%). In the section Opinions of Evoqua's Financial Advisors-Opinion of Evoqua'sFinancial Advisor-Goldman Sachs & Co. LLC , the second and third sentences of the second paragraph in the section Illustrative Discounted Cash Flow Analysis-Evoqua Standalone, on page 107 of the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement, are restated in their entirety as follows: Goldman Sachs then subtracted from the range of illustrative EVs it derived for Evoqua the amount of Evoqua's net debt of approximately$767 million as provided by and approved for Goldman Sachs' use by the management of Evoqua, to derive a range of illustrative equity values for Evoqua. Goldman Sachs then divided the range of illustrative equity values it derived by the number of fully diluted outstanding shares of Evoqua Common Stock ranging from approximately 126.4 million to 126.8 million, as provided by and approved for Goldman Sachs' use by the management of Evoqua, using the treasury stock method, to derive a range of illustrative present values per share of Evoqua Common Stock ranging from$42 to$54 , rounded to the nearest dollar. In the section Opinions of Evoqua's Financial Advisors-Opinion of Evoqua'sFinancial Advisor-Goldman Sachs & Co. LLC , the second sentence of the first paragraph in the sectionIllustrative Discounted Cash Flow Analysis-Pro Forma Combined Company , on page 107 of the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement, is restated in its entirety as follows: Using the mid-year convention for discounting cash flows and discount rates ranging from 9.0% to 10.5%, reflecting estimates of the combined company's weighted average cost of capital, Goldman Sachs discounted to present value as ofDecember 31, 2022 (i) estimates of unlevered free cash flow for the pro forma combined company for the second through fourth quarters of fiscal year 2023 and for fiscal years 2024 and 2025 as reflected in the Evoqua -------------------------------------------------------------------------------- Integrated Forecasted Financial Information and (ii) a range of illustrative terminal values for the pro forma combined company, which were calculated by applying terminal year exit EV/EBITDA multiples ranging from 21.0x to 25.0x, to a terminal year estimate of the EBITDA of approximately$1,870 million to be generated by the pro forma combined company, as reflected in the Evoqua Integrated Forecasted Financial Information (which analysis implied perpetuity growth rates of 5.7% to 7.7%). In the section Opinions of Evoqua's Financial Advisors-Opinion of Evoqua'sFinancial Advisor-Goldman Sachs & Co. LLC , the second and third sentences of the second paragraph in the sectionIllustrative Discounted Cash Flow Analysis-Pro Forma Combined Company , on page 108 of the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement, are restated in their entirety as follows: Goldman Sachs then subtracted from the range of illustrative pro forma EVs the amount of pro forma combined company net debt of approximately$1,742 million as provided by and approved for Goldman Sachs' use by the management of Evoqua, to derive a range of implied pro forma equity values for the combined company. Goldman Sachs then divided the range of implied pro forma equity values it derived by the number of pro forma fully diluted shares of combined company common stock ("Combined Company Common Stock") expected to be outstanding following the consummation of the Merger ranging from approximately 243.0 million to 243.2 million, as provided by and approved for Goldman Sachs' use by the management of Evoqua, using the treasury stock method.
In the section Opinions of Evoqua's Financial Advisors-Opinion of Evoqua's
Goldman Sachs then subtracted the amount of Evoqua's net debt of approximately$732 million and$689 million for each of the fiscal years 2023 and 2024 respectively, each as provided by and approved for Goldman Sachs' use by the management of Evoqua, from the respective illustrative EVs in order to derive a range of implied equity values as ofSeptember 30 for Evoqua for each of the fiscal years 2023 and 2024.
In the section Opinions of Evoqua's Financial Advisors-Opinion of Evoqua's
Goldman Sachs then subtracted the amount of the combined company's net debt of approximately$1,602 million and$1,135 million for each of the fiscal years 2023 and 2024 respectively, each as provided by and approved for Goldman Sachs' use by the management of Evoqua, from the respective illustrative pro forma EVs in order to derive a range of implied equity values as ofSeptember 30 for each of the fiscal years 2023 and 2024. In the section Opinions of Evoqua's Financial Advisors-Opinion of Evoqua'sFinancial Advisor-Goldman Sachs & Co. LLC , the table in the section Selected Transactions Analysis, on page 109 of the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement, is restated in its entirety as follows: EV per transaction ($ in Announcement Date Acquiror Target EV/LTM Adj. EBITDA millions) February 2022 Zurn Water Solutions Elkay Manufacturing Corporation Company 16.6x $ 1,564 January 2020 Cott Corporation Primo Water Corporation 15.4x $ 775 December 2019 Culligan International AquaVenture Holdings Company Limited 15.1x $ 1,118 December 2017 Xylem Inc. Pure Technologies Ltd. 24.4x CAD 509 March 2017 SUEZ | Caisse de dépôt GE Water & Power et placement du Québec Technologies 12.5x $ 3,400 August 2016 Xylem Inc. Sensus USA Inc. 10.7x $ 1,700 May 2015 Danaher Corporation Pall Corporation 20.8x $ 13,800 November 2014 Watts Water AERCO International Technologies Inc. Inc. 11.0x $ 265
-------------------------------------------------------------------------------- In the section Opinions of Evoqua's Financial Advisors-Opinion of Evoqua'sFinancial Advisor-BofA Securities, Inc. , following the second full paragraph in the section Summary of Material Evoqua Financial Analyses-Selected Publicly Traded Companies Analysis, on page 113 of the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement, the following sentence and table are inserted:
The following table presents the selected publicly traded companies and their enterprise value / estimated adjusted EBITDA:
EV / Adj. EBITDA
Company 2023E 2024E
Primary Peers:
Ecolab Inc. 17.0x 15.6x
Xylem Inc. 21.4x 19.5x
Industrie de Nora S.p.A 19.8x 16.3x
Other Peers:
Pentair plc 12.3x 11.6x
A.O. Smith Corporation 12.4x 11.8x
Kurita Water Industries Ltd. 10.0x 9.3x
In the section Opinions of Evoqua's Financial Advisors-Opinion of Evoqua's
Financial Advisor-BofA Securities, Inc. , following the second sentence of the
first paragraph in the section Summary of Material Evoqua Financial
Analyses-Discounted Cash Flow Analysis, on page 114 of the Xylem Proxy
Statement/Prospectus and the Evoqua Proxy Statement, the following sentence is
inserted:
The selected range of terminal forward multiples was based on
In the section Opinions of Evoqua's Financial Advisors-Opinion of Evoqua's
The cash flows and terminal values were then discounted to present value, assuming a mid-year convention, as ofDecember 31, 2022 , using discount rates ranging from 9.0% to 11.0%, which were based on an estimate of Evoqua's weighted average cost of capital, derived using the capital asset pricing model, which took into account, among other things, risk free rate, levered beta, and historical equity risk premium. In the section Opinions of Evoqua's Financial Advisors-Opinion of Evoqua'sFinancial Advisor-BofA Securities, Inc. , following the second sentence of the third bullet point in the section Summary of Material Evoqua Financial Analyses-Other Factors, on page 114 of the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement, the following sentence is inserted:
The selected range of terminal forward multiples was based on
In the section Opinions of Evoqua's Financial Advisors-Opinion of Evoqua's
The cash flows and terminal values were then discounted to present value, assuming a mid-year convention, as ofDecember 31, 2022 , using discount rates ranging from 9.0% to 11.0%, which were based on an estimate of Evoqua's weighted average cost of capital, derived using the capital asset pricing model, which took into account, among other things, risk free rate, levered beta, and historical equity risk premium. -------------------------------------------------------------------------------- In the section Opinions of Evoqua's Financial Advisors-Opinion of Evoqua'sFinancial Advisor-BofA Securities, Inc. , following the second full paragraph in the section Summary of Material Xylem Financial Analyses-Selected Publicly Traded Companies Analysis, on page 115 of the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement, the following sentence and table are inserted:
The following table presents the selected publicly traded companies and their enterprise value / estimated adjusted EBITDA:
EV / Adj. EBITDA
Company 2023E 2024E
Primary Peers:
Evoqua Water Technologies Corp. 18.2x 16.8x
Franklin Electric Co., Inc. 13.3x 12.4x
Badger Meter Inc 25.9x 24.5x
Other Peers:
Pentair plc 12.3x 11.6x
Watts Water Technologies, Inc. 13.7x 13.3x
Zurn Elkay Water Solutions Corporation 12.6x 11.6x Mueller Water Products, Inc.
9.5x 8.8x
In the section Opinions of Evoqua's Financial Advisors-Opinion of Evoqua's
Financial Advisor-BofA Securities, Inc. , following the second sentence of the
first paragraph in the section Summary of Material Xylem Financial
Analyses-Discounted Cash Flow Analysis, on page 115 of the Xylem Proxy
Statement/Prospectus and the Evoqua Proxy Statement, the following sentence is
inserted:
The selected range of terminal forward multiples was based on
In the section Opinions of Evoqua's Financial Advisors-Opinion of Evoqua'sFinancial Advisor-BofA Securities, Inc. , the third sentence of the first paragraph in the section Summary of Material Xylem Financial Analyses-Discounted Cash Flow Analysis, on page 115 of the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement, is restated in its entirety as follows: The cash flows and terminal values were then discounted to present value, assuming a mid-year convention, as ofDecember 31, 2022 , using discount rates ranging from 9.0% to 11.0%, which were based on an estimate of Xylem's weighted average cost of capital, derived using the capital asset pricing model, which took into account, among other things, risk free rate, levered beta, and historical equity risk premium.
--------------------------------------------------------------------------------
Correction of Computational Errors
The first table on page 126 of the Xylem Proxy Statement/Prospectus and the Evoqua Proxy Statement is restated in its entirety as follows to correct two computational errors in the "Estimated Value of Vested Evoqua Options" column as toMr. Keating andMr. Stas : Number of Shares Subject to Evoqua Options Estimated Estimated Vested Unvested Value of Value of Evoqua Evoqua Vested Unvested Options
Options Evoqua Options Evoqua Options Name of Executive Officer or Non-Employee Director (#)
(#) ($) ($) Executive Officer: Ron C. Keating 1,915,311 159,518 69,635,457 3,732,322 Benedict J. Stas 461,697 46,426 16,234,294 1,086,472 Rodney O. Aulick 121,372 29,455 3,252,443 688,823 Snehal A. Desai 139,690 18,365 3,848,205 429,642 Hervé P. Fages 33,614 27,030 945,182 632,003 Vincent Grieco 125,593 18,365 3,887,022 429,642 James M. Kohosek 87,291 15,940 2,519,673 372,822 Anthony J. Webster 94,072 15,940 2,701,607 372,822 Non-Employee Director: Nick Bhambri 54,807 - 2,360,537 - Martin J. Lamb 44,903 - 1,933,972 -
Forward-Looking Statements
This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Generally, the words "anticipate," "estimate," "expect," "project," "intend," "plan," "contemplate," "predict," "forecast," "likely," "believe," "target," "will," "could," "would," "should," "potential," "may" and similar expressions or their negative, may, but are not necessary to, identify forward-looking statements. Such forward-looking statements, including those regarding the timing, consummation and anticipated benefits of the transaction described herein, involve risks and uncertainties. Xylem's and Evoqua's experience and results may differ materially from the experience and results anticipated in such statements. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions including, but are not limited to, the following factors: the risk that the conditions to the closing of the transaction are not satisfied, including the risk that required approvals of the transaction from the shareholders of Xylem or stockholders of Evoqua or from regulators are not obtained; litigation relating to the transaction; uncertainties as to the timing of the consummation of the transaction and the ability of each party to consummate the transaction; risks that the proposed transaction disrupts the current plans or operations of Xylem or Evoqua; the ability of Xylem and Evoqua to retain and hire key personnel; competitive responses to the proposed transaction; unexpected costs, charges or expenses resulting from the transaction; potential adverse reactions or changes to relationships with customers, suppliers, distributors and other business partners resulting from the announcement or completion of the transaction; the combined company's ability to achieve the synergies expected from the transaction, as well as delays, challenges and expenses associated with integrating the combined company's existing businesses; the impact of overall industry and general economic conditions, including inflation, interest rates and related monetary policy by governments in response to inflation; geopolitical events, including the war betweenRussia andUkraine , and regulatory, economic and other risks associated therewith; and continued uncertainty around the ongoing impacts of the COVID-19 pandemic, as well as broader macroeconomic conditions. Other factors that might cause such a difference include those discussed in Xylem's and Evoqua's filings with theSEC , which include their Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and in the joint proxy statement/prospectus on Form S-4 filed in connection with the proposed transaction. For more information, see the section entitled "Risk Factors" and the -------------------------------------------------------------------------------- forward-looking statements disclosure contained in Xylem's and Evoqua's Annual Reports on Form 10-K and in other filings. The forward-looking statements included in this document are made only as of the date hereof and, except as required by federal securities laws and rules and regulations of theSEC , Xylem and Evoqua undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Additional Information and Where to Find It
In connection with the proposed transaction with Xylem, Xylem has filed with theSEC a registration statement on Form S-4 that includes a joint proxy statement of Xylem and Evoqua that also constitutes a prospectus of Xylem. The registration statement was declared effective by theSEC onApril 6, 2023 . OnApril 11, 2023 , Evoqua and Xylem also filed with theSEC the Evoqua Proxy Statement and the Xylem Proxy Statement/Prospectus. Evoqua and Xylem began mailing the Evoqua Proxy Statement and the Xylem Proxy Statement/Prospectus to their respective stockholders and shareholders on or aroundApril 11, 2023 . Each of Xylem and Evoqua may also file other relevant documents with theSEC regarding the proposed transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT, JOINT PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders can obtain free copies of these documents and other documents filed with theSEC by Xylem and Evoqua through the website maintained by theSEC at http://www.sec.gov. Copies of the documents filed with theSEC by Xylem are available free of charge on Xylem's website at www.xylem.com or by contacting Xylem's Investor Relations Department by email at andrea.vanderberg@xylem.com or by phone at +1 (914) 260-8612. Copies of the documents filed with theSEC by Evoqua are available free of charge on Evoqua's internet website at www.evoqua.com or by contactingEvoqua Water Technologies Corp. ,210 Sixth Avenue , Suite 3300,Pittsburgh, PA 15222, ATTN: General Counsel and Secretary.
Participants in the Solicitation
Xylem, Evoqua and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in connection with the proposed transaction. Information about the directors and executive officers of Xylem is set forth in Xylem's proxy statement for its 2023 annual meeting of shareholders, which was filed with theSEC onApril 3, 2023 , and Xylem's Annual . . .
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