A. O. Smith sells 81% stake in China business to CPE

A. O. Smith, a water technology company, has agreed to sell an 81% stake in its China business to CPE, an alternative asset manager. The transaction, valued at approximately $400 million on a cash-free, debt-free basis, is expected to exceed $500 million when including ongoing brand licensing royalties over a multi-decade period.

A. O. Smith will retain a 19% stake in the business. The deal includes a long-term brand licensing agreement, allowing A. O. Smith to repatriate about $80 million in cash held in China. The company plans to use the after-tax proceeds and repatriated cash to prioritize share repurchases following the transaction's closing, which is anticipated in the first half of 2027.

CEO Steve Shafer believes the sale positions the China business for future growth under experienced local ownership while enabling A. O. Smith to focus on high-return opportunities. CPE Managing Director Liuwei Qin expressed enthusiasm for supporting the business's growth through continued investment in product innovation and service capabilities.

The transaction requires regulatory approvals and meeting customary closing conditions. Financial advisor Goldman Sachs & Co. LLC and legal counsel Latham & Watkins LLP are assisting A. O. Smith with the deal. A. O. Smith will release its third-quarter financial results on Thursday.