Zurn Elkay Water Solutions Corporation Announces Pricing of Public Offering by Selling Stockholder

Rhea-AI Summary

Zurn Elkay Water Solutions (NYSE:ZWS) announced the pricing of a public offering by Ice Mountain , a former Elkay stockholder, of 7,750,000 shares at $35.00 per share. Zurn Elkay will repurchase approximately $55 million worth of shares (1,636,905 shares) from the underwriters at the same price.

The underwriters have a 30-day option to purchase an additional 1,162,500 shares. Ice Mountain , representing the Katz family's interests from the 2022 Zurn-Elkay merger, will receive all net proceeds. The selling stockholder has committed to a lock-up agreement for remaining shares until October 31, 2026.

Evercore ISI leads the offering as joint book-running manager, with Baird as additional book-running manager. The offering is expected to close on February 13, 2025.

Positive

• Company to repurchase $55 million worth of shares
• Selling stockholder (Katz family) commits to long-term investment with lock-up until October 2026
• Multiple prestigious financial institutions involved in managing the offering

Negative

• Large secondary offering of 7.75 million shares could pressure stock price
• Additional 1.16 million shares may enter market through underwriters' option
• Company spending $55 million on share repurchase instead of operations or growth

Insights

Financial Markets Analyst

This secondary offering represents a carefully structured transaction with multiple strategic elements worth noting. The 7.75 million share offering, priced at $35.00 per share, represents approximately 12.2% of Zurn Elkay's market capitalization, making it a substantial but manageable offering size.

The company's decision to repurchase $55 million worth of shares is particularly strategic, as it helps absorb potential market pressure while signaling management's confidence in the company's valuation. This buyback represents about 0.86% of shares outstanding, effectively reducing the net increase in public float.

The extended lock-up agreement until October 2026 for Ice Mountain 's remaining shares is exceptionally long by market standards, where typical lock-ups range from 180 days to one year. This unusually lengthy commitment period provides strong assurance to the market about the founding family's continued confidence in Zurn Elkay's long-term prospects.

The involvement of multiple tier-one investment banks, led by Evercore ISI and Baird, suggests a well-coordinated distribution strategy designed to minimize market impact. The additional 30-day option for 1.16 million shares provides flexibility to meet excess demand while maintaining price stability.

MILWAUKEE--(BUSINESS WIRE)-- Zurn Elkay Water Solutions Corporation (NYSE:ZWS) (“Zurn Elkay”) today announced the pricing of the previously announced underwritten public offering by a certain former Elkay stockholder, Ice Mountain LLC (the “selling stockholder”), of 7,750,000 shares of Zurn Elkay’s common stock, par value $0.01 per share (“common stock”), at a price to the public of $35.00 per share. The offering is expected to close on February 13, 2025, subject to customary closing conditions.

Zurn Elkay has agreed to repurchase from the underwriters 1,636,905 (or approximately $55,000,000) of such shares of common stock at a price per share equal to the price per share paid by the underwriter to the selling stockholder in the offering. The underwriters will have a 30-day option to purchase up to an additional 1,162,500 shares of common stock from the selling stockholder. The selling stockholder will receive all of the net proceeds from the offering. No shares are being sold by Zurn Elkay in the offering.

Ice Mountain LLC acquired its shares in Zurn Elkay as a result of the combination of Zurn and Elkay in 2022. Ice Mountain LLC’s holdings in Zurn Elkay represent the interests of those members of the Katz family (the founding family of Elkay) who owned a controlling interest in Elkay (a family-owned business formed in 1920) immediately before merging with Zurn. The family members that Ice Mountain LLC represents have expressed their desire to continue to be a significant investor in Zurn Elkay for the long-term, with no current plans to further diversify its remaining holdings, and as such, Ice Mountain LLC has entered into a lock-up agreement for its remaining shares that expires October 31, 2026.

Evercore ISI is acting as the lead joint book-running manager. Baird is acting as an additional book-running manager. BNP Paribas, Deutsche Bank Securities, Mizuho, Oppenheimer & Co., and Stifel are acting as co-managers for the offering.

Zurn Elkay has filed a registration statement (including a base prospectus) on Form S-3 and a preliminary prospectus supplement with the Securities and Exchange Commission (the “SEC”) for the offering to which this communication relates. The registration statement became effective upon filing on February 11, 2025. Before you invest, you should read the prospectus in that registration statement, the prospectus supplement, and other documents Zurn Elkay has filed with the SEC for more complete information about Zurn Elkay and the offering. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, copies of the preliminary prospectus supplement and the accompanying prospectus relating to the offering may be obtained by contacting Evercore Group L.L.C., Attention: Equity Capital Markets, 55 East 52nd Street, 35th Floor, New York, New York 10055, by telephone at 888-474-0200, or by email at ecm.prospectus@evercore.com; or Baird, 777 East Wisconsin Avenue, Milwaukee, WI 53202, Attention: Syndicate Department, Telephone: 800-792-2473, Email: syndicate@rwbaird.com.

This press release does not constitute an offer to sell or a solicitation of an offer to buy these securities, nor does it constitute an offer, solicitation or sale of these securities in any jurisdiction in which such offer, solicitation or sale is unlawful.

About Zurn Elkay Water Solutions

Named one of America’s Most Responsible Companies and one of America’s Greenest Companies by Newsweek and one of the World’s Best Companies for Sustainable Growth by TIME, Zurn Elkay Water Solutions is headquartered in Milwaukee, WI, and is a growth-oriented, pure-play water management business that designs, procures, manufactures and markets what we believe to be the broadest sustainable product portfolio of specification-driven water management solutions to improve health, hydration, human safety and the environment. The Zurn Elkay product portfolio includes professional grade water safety and control products, flow systems products, hygienic and environmental products and filtered drinking water products for public and private spaces. Learn more at www.zurnelkay.com.

Cautionary Statement on Forward-Looking Statements

Information in this release may involve outlook, expectations, beliefs, plans, intentions, strategies or other statements regarding the future, which are forward-looking statements. These forward-looking statements involve risks and uncertainties. All forward-looking statements included in this release are based on information available to Zurn Elkay Water Solutions as of the date of this release, and Zurn Elkay Water Solutions assumes no obligation to update any such forward-looking statements. The statements in this release are not guarantees of future performance, and actual results could differ materially from current expectations. Numerous factors could cause or contribute to such differences. Please refer to “Risk Factors” and “Cautionary Notice Regarding Forward-Looking Statements” in Zurn Elkay’s annual report on Form 10-K for the period ended December 31, 2024, as well as Zurn Elkay’s subsequent annual, quarterly and current reports filed on Forms 10-K, 10-Q and 8-K from time to time with the Securities and Exchange Commission for a further discussion of the factors and risks associated with the business.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250211226679/en/

Dave Pauli

Chief Financial Officer

414.223.7770

Source: Zurn Elkay Water Solutions Corporation

FAQ

How many shares is Ice Mountain selling in the ZWS public offering?

Ice Mountain is selling 7,750,000 shares of Zurn Elkay Water Solutions common stock at $35.00 per share.

What is the value of ZWS shares being repurchased by the company?

Zurn Elkay will repurchase approximately $55 million worth of shares (1,636,905 shares) from the underwriters.

When does Ice Mountain 's lock-up agreement for remaining ZWS shares expire?

The lock-up agreement for Ice Mountain 's remaining shares expires on October 31, 2026.

When is the ZWS public offering expected to close?

The offering is expected to close on February 13, 2025, subject to customary closing conditions.

How many additional ZWS shares can underwriters purchase through their option?

The underwriters have a 30-day option to purchase up to an additional 1,162,500 shares from the selling stockholder.