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Advanced Drainage Systems Inc. has acquired Infiltrator Water Technologies for approximately $1.08 billion, subject to various closing and post-closing adjustments, from an affiliate of the Ontario Teachers’ Pension Plan and other stockholders. The deal builds on ADS’ existing water management solutions platform and is an opportunity to expand into the on-site septic business.

Infiltrator provides plastic leach field chambers and systems, septic tanks and accessories, primarily for residential applications. Infiltrator products are used in on-site water treatment systems in the U.S. and Canada and generated approximately $275 million in revenue and $89 million in adjusted EBITDA during 2018. Infiltrator has been a longstanding supplier and customer of ADS for over 15 years.

The Hilliard, Ohio, manufacturer of water management products and solutions initially funded the transaction with drawings under a senior secured credit facility arranged by Barclays and Morgan Stanley Senior Funding Inc. ADS expects to refinance the facility through a combination of opportunistic capital markets transactions.

ADS intends to utilize its combined cash flows to reduce leverage quickly and ultimately intends to return to its long-term target leverage of less than 3x within 18 months.

On a pro forma basis for the company’s fiscal year ended March 31, the combined companies would have had revenues of approximately $1.6 billion, adjusted EBITDA margins of approximately 20.4 percent, and free cash flow conversion of nearly 50 percent. ADS’ management anticipates the acquisition will be accretive to adjusted EBITDA in year one, accretive to EPS in the first full year and yield approximately $20 million to $25 million in run-rate synergies by year three.

The Infiltrator acquisition also should enhance ADS’ sales growth, margins and cash flow generation, align with ADS’ core growth strategies and commitment to innovation, and combine best-in-class polypropylene and polyethylene recycling capabilities.