Milwaukee, October 27th / PRNewswire / -- Global water technology company A.O. Smith Corporation (“A.O. Smith” or “the Company”) ( NYSE : AOS ) announced today that it has reached a final agreement with leading alternative asset management firm CPE. CPE will acquire 81% of A.O. Smith's business in China. A.O. Smith will retain 19% of the equity and sign a long-term brand licensing agreement; both moves will enable the companies to participate in the future growth of this business.
Excluding cash and debt, the valuation of this Chinese business before incorporating long-term brand licensing fees is approximately $400 million. Including the present value of the ongoing licensing economic value that should be paid to A.O. Smith over multiple years, the total transaction value is expected to exceed $500 million. In addition, this transaction structure will enable A.O. Smith to repatriate approximately $80 million in cash currently held in China. The company stated that, in accordance with its commitment to return capital to shareholders, after the completion of the transaction, it will prioritize using the after-tax proceeds and repatriated cash for share repurchases.
This agreement was reached after a comprehensive strategic alternative assessment of its operations in China was announced in July 2025. Following an evaluation of various options, the board of directors of A.O. Smith concluded that entering into a strategic transaction with CPE represented the best path forward for its business in China, the company itself, and its shareholders. This transaction will enable A.O. Smith to focus more on its portfolio while still retaining the opportunity to participate in future value creation in China.
"For over 30 years, A.O. has established a leading high-end brand in China, backed by a extensive distribution network, differentiated innovation, and a highly talented local team," said Steve Shafer, Chairman and CEO of A.O. "We believe that this transaction will enable the Chinese business to continue to grow under the leadership of experienced local owners, while allowing A.O. to focus its resources on the highest-returning opportunities and drive sustainable value creation."
A.O. Smith and CPE commit to continuing to serve the customers and distributors of this business during the transition period and beyond. As the brand owner and minority shareholder, A.O. Smith will continue to cooperate with CPE in terms of brand, product innovation, and service quality.
Shafer added, "We are very grateful for the leadership and continuous dedication of our Chinese employees, especially in a challenging market environment. We believe that CPE is the right partner to lead this business forward."
CPE adopts a long-term, value-oriented investment approach that covers various sectors including AI's entire industrial chain, advanced manufacturing, consumer goods, healthcare, and infrastructure. It also has extensive experience in collaborating with multinational corporations, including its recent strategic partnership with Restaurant Brands International to support the business operations of Burger King in China.
“A.O. Smith has built a trustworthy high-end brand and a strong business in China over the past 30 years,” said Liu Weiqin, Director General of CPE. “We are very pleased and proud to invest in A.O. Smith’s business in China, and we look forward to supporting its growth in the next phase through continuous investment in product innovation, service capabilities, and customer relationships.”
Transaction Details
CPE will acquire 81% of the equity in Smith ( China ) Investment Co., Ltd. (“CIC”). CIC is the holding company for A. O.'s business in China, while A. O. Smith will retain 19% of the equity. A. O. Smith will also continue to receive royalties under the long-term licensing agreement for A. O.'s Smith brand within China. For more information about this transaction, please visit the company's website by clicking here.
The transaction is expected to be completed in the first half of 2027, but it still requires regulatory approval and fulfillment of other customary delivery conditions.
Goldman Sachs (Goldman Sachs & Co. LLC) served as the financial advisor to A.O. Smith, while Latham & Watkins LLP acted as its legal counsel.
A. O. Smith will announce its third-quarter financial results on October 29, 2026, and will hold a web conference at 10:00 a.m. Eastern Time to discuss the results and the company's guidance for the remainder of this year. The web conference can be listened to live on the company's website; click here to access it. The audio replay of the conference and related presentation materials will be available on the company's website after the live broadcast. To access the archived audio replay and related presentation materials, please go to the “Investors” page and select the “Third Quarter 2026 Earnings Call” link.
Forward-looking Statements
This press release contains what the company considers to be “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements can typically be identified by words such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “forecast”, “continue”, “guidance”, “outlook”, “confident”, and similar expressions. All forward-looking statements are subject to risks and uncertainties and may result in significant differences between actual outcomes and those anticipated at the date of issuance of this press release.Important factors that may lead to significant differences between actual results and these expectations include, but are not limited to: the timing and impact of transactions related to the company's operations in China, including the possibility that parties may not obtain necessary regulatory approvals or fail to meet other transaction conditions; potential negative impacts associated with the announcement of such transactions; failure to achieve the expected benefits from these transactions; further weakening demand for residential and commercial water heaters in the United States; further sluggishness in residential or commercial construction in North America, or instability in the replacement market for the company; failure to realize the expected benefits or synergies from mergers and acquisitions; unpredictable operating results of the acquired businesses; negative effects of international tariffs on the company's business, including any new or increased tariffs and potential retaliatory measures by other countries, as well as trade disputes and geopolitical tensions such as those in Ukraine and the Middle East; global inflationary pressures or economic recessions in one or more of the markets in which the company operates, which could negatively affect demand for the company's products; whether the company can obtain bulk commodities, parts, accessories, and attachments in a timely manner at expected costs through its supply chain, including recent fluctuations in fuel and other raw material prices; the company's ability to implement or maintain pricing strategies; uneven recovery of the Chinese economy, or further declines in consumer spending or housing sales in China; the availability, timing, and effectiveness of stimulus policies in China; failure to achieve the expected benefits from restructuring efforts; further weakening of the high-efficiency gas boiler market in the United States; significant payment defaults by key customers, substantial reductions in purchases, or loss of major customers, bankruptcy, or insolvency; foreign exchange fluctuations; failure to realize the expected benefits, timing, and scope of regulatory changes; competitive pressures faced by the company's business, including from new technologies and new competitors; potential impacts of information technology or data security vulnerabilities; negative effects of changes in government regulations or regulatory requirements; inability to adapt to long-term trends in decarbonization and energy efficiency improvements; and overall economic conditions in key regions around the world.Adverse developments in the political and business environment. For more factors, please refer to the documents submitted by the company to the U.S. Securities and Exchange Commission, including the 10-K annual report for the fiscal year ending December 31, 2025, the 10-Q quarterly report, and the 8-K current report. The forward-looking statements in this press release are only valid as of the date of issuance, and the company has no obligation to update these statements due to subsequent events or circumstances. All subsequent written and oral forward-looking statements made by the company or persons acting on its behalf are subject to these cautionary statements.
About A. O. Smith
A.O. Smith Corporation is headquartered in Milwaukee, Wisconsin, and is a globally leading company dedicated to applying innovative technologies and energy-saving solutions to products manufactured and sold worldwide. The company is listed on the New York Stock Exchange (NYSE : AOS) and is one of the world's leading manufacturers of residential and commercial hot water equipment and boilers. It is also a manufacturer of water treatment and water management products. For more information, please visit www.aosmith.com.
About CPE
CPE is an alternative asset management firm with extensive experience in China, as well as an international perspective. With a long-term outlook and value investment strategy, CPE provides innovative investment solutions for leading companies across a variety of themes and industries, including AI value chains, advanced manufacturing, consumer goods, healthcare, and infrastructure. Currently, thanks to its strong long-term performance, the funds managed by CPE have received support from over 200 domestic and international institutional investors from North America, Europe, Asia, and the Middle East. Its core investment team has completed more than 300 global investments and has a track record of outstanding performance in multiple dollar and yuan funds, with a total management scale of over 150 billion yuan, enabling the company to accumulate knowledge in key industries and build a broad business network. With solid investment and research processes, strong industry expertise, and professional portfolio management capabilities, CPE establishes long-term relationships with the companies it invests in to promote their value creation and sustainable growth. At present, CPE has offices in Beijing, Shanghai, Hong Kong, New York, London, Tokyo, and Abu Dhabi. For more information, please visit www.cpe-fund.com.
