Zenon shares floating on takeover speculation?
Oakville-based Zenon Environmental may be one of the leaders in water treatment, but production delays related to quality standards has again prompted the company to issue a quarterly earnings warning. The company’s stock fell, but surprisingly it hasn’t taken the kind of beating that most technology companies take when they warn of missed profit targets. This has led some analysts to speculate that Zenon’s shares are being held up by the expectation that the company is a takeover target.
It’s no secret that the water filtration and treatment market is poised for further consolidation, and that large companies such as General Electric have aggressively committed to the space.
Canaccord Capital analyst Sara Elford told Canadian Press that investors may be motivated by a high rate of consolidation among other water companies. For example, U.S.-based Danaher Corp. spent $247 million a year ago to acquire Canadian-based Trojan Technologies Inc., which specialized in UV water treatment.
Zenon CEO Andrew Benedek said the problem has been dealt with and that the company expects to achieve its targeted production level by the end of 2005. Perhaps investors are simply cutting Zenon some slack?
Nah, doubt it.
BTW: This article is a few months old, but if you want a snapshot of M&A activity and opportunity in the water filtration market, check out this trade magazine article. Another good read I’ve referred to before is this Red Herring article from August.
Tyler Hamilton is editor-in-chief of Corporate Knights magazine and a business columnist for the Toronto Star, Canada's largest daily newspaper. In addition to this Clean Break blog, Tyler writes a weekly column of the same name that discusses trends, happenings and innovators in the clean technology and green energy market. This blog is a personal project started in April 2005. It is not an official blog of the newspaper.
