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Mueller Water Products (NYSE:MWA) +1.2% in Thursday’s trading as RBC analyst Deane Dray tapped it as the industrial company most likely to be acquired this year.
Mueller (MWA) is small, Mueller is relatively small at a ~$2.5B market cap, has an activist investor that could push for a sale, and finding a permanent CEO candidate has taken more than nine months, Dray says, noting the company’s promising smart water technologies businesses could be carved out and the legacy hydrants and specialty valves businesses could end with a private equity or industrial flow owner.
With the new foundry upgrade mostly completed and the full run rate of operations expected by year-end 2024, Dray sees the possibility of greater interest in the company with a line of sight to the completion of the new foundry.
Dray’s “runner-up” as a potential acquisition target is Wesco (WCC), believing the stock’s undemanding valuation of 8.2x estimated 2024 EBITDA multiple, successful deleveraging progress, and a market leading position could induce private equity buyers to take the company private through a leveraged buyout.
The analyst’s “most likely to attract activist interest” is Johnson Controls (JCI), noting the recent “leak” of a strategic review for its residential HVAC business suggests activist investors may have been involved, since they often push for divestitures or spinoffs to unlock shareholder value, although “if it were easy, it would have been done a while ago.”
