Milwaukee, October 27 /PRNewswire/ — A. O. Smith Corporation (“A. O. Smith” or the “Company”) (NYSE: AOS), a global water technology company, today announced that it has entered into a definitive agreement with leading alternative asset manager CPE, under which CPE will acquire an 81% equity interest in A. O. Smith’s China business. A. O. Smith will retain a 19% equity interest and enter into a long-term brand licensing agreement, both of which will enable the Company to participate in the future growth of the business.
Excluding cash and debt, and before accounting for long-term brand licensing revenue, the valuation of this China business is approximately $400 million. Including the net present value of the ongoing licensing economic value payable to A. O. Smith over a multi-year term, the total transaction value is expected to exceed $500 million. Additionally, the transaction structure will enable A. O. Smith to repatriate approximately $80 million in cash currently held in China. The company stated that, in line with its commitment to return capital to shareholders, post-transaction proceeds and repatriated cash will be prioritized for share repurchases.
This agreement was reached following the announcement in July 2025 of a comprehensive strategic alternatives assessment for its China business. After evaluating a wide range of options, the A. O. Smith board determined that entering into a strategic transaction with CPE represents the optimal path forward for the China business, the company, and its shareholders. The transaction will enable A. O. Smith to focus more sharply on its portfolio while retaining the opportunity to participate in future value creation in China.
“For over 30 years, A. O. Smith has established a leading premium brand in China, supported by an extensive distribution network, differentiated innovation, and a highly talented local team,” said Steve Shafer, Chairman and CEO of A. O. Smith. “We believe this transaction will enable our China business to continue growing under the leadership of an experienced local owner, while allowing A. O. Smith to focus its resources on the highest-return opportunities and drive sustainable value creation.”
A. O. Smith and CPE commit to continuing service to the customers and distributors of this business during and after the transition period. As the brand owner and minority shareholder, A. O. Smith will continue to collaborate with CPE on branding, product innovation, and service quality.
Shafer added, "We are deeply grateful for the leadership and continued dedication of our China team, especially in a challenging market environment. We believe CPE is the right partner to lead this business forward."
CPE adopts a long-term, value-driven investment approach, covering the entire AI industry chain, advanced manufacturing, consumer goods, healthcare, and infrastructure, and has extensive experience collaborating with multinational corporations, including its recent strategic partnership with Restaurant Brands International to support Burger King’s operations in China.
“A. O. Smith has built a trusted premium brand and a strong business in China over more than 30 years,” said Liu Weiqin, Managing Director of CPE. “We are delighted and proud to invest in A. O. Smith’s China business and look forward to supporting its next phase of growth through continued investment in product innovation, service capabilities, and customer relationships.”
Transaction Details
CPE will acquire an 81% equity interest in A. O. Smith (China) Investment Co., Ltd. (“CIC”). CIC is the holding company for A. O. Smith’s China business, and A. O. Smith will retain a 19% equity interest. A. O. Smith will also receive ongoing royalties under a long-term licensing agreement for the A. O. Smith brand within China. For more information about this transaction, visit the company’s website here.
The transaction is expected to be completed in the first half of 2027 and is subject to regulatory approvals and other customary closing conditions.
Goldman Sachs & Co. LLC served as financial advisor to A. O. Smith, and Latham & Watkins LLP served as its legal advisor.
A. O. Smith will announce its third-quarter financial results on October 29, 2026, and hold a webcast conference call at 10:00 a.m. Eastern Daylight Time to discuss the results and the company’s guidance for the remainder of the year. The conference call can be listened to live on the company’s website by clicking here. An audio replay of the call and related presentation materials will be available on the company’s website following the live event. To access the archived audio replay and related presentation materials, visit the “Investors” page and select the “Third Quarter 2026 Earnings Call” link.
Forward-looking statements
This press release contains statements that the company believes constitute "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "forecast," "continue," "guidance," "outlook," "confident," or similar expressions. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this press release. Important factors that could cause actual results to differ materially from these expectations include, but are not limited to: the timing and impact of the China business transaction, including the possibility that the parties may not obtain required regulatory approvals or fail to satisfy other conditions of the transaction; potential negative impacts related to the announcement of the China business transaction; failure to realize the expected benefits of the China business transaction; further weakening of demand for residential and commercial water heaters in the United States; further weakness in North American residential or commercial construction, or instability in the company’s replacement market; failure to achieve the expected benefits or synergies from acquisitions; difficulty in predicting the operating results of acquired businesses; negative impacts on the company’s business from international tariffs, including any new or increased tariffs and those that may trigger retaliatory responses from other countries, as well as trade disputes and geopolitical tensions such as conflicts in Ukraine and the Middle East; negative impacts on demand for the company and its products due to global inflationary pressures or a recession in one or more markets in which the company operates; the company’s ability to consistently obtain commodities, components, fittings, and accessories through its supply chain in a timely manner and at expected costs, including recent fluctuations in fuel and other raw material prices; the company’s inability to implement or maintain pricing actions; uneven economic recovery in China, or further declines in Chinese consumer spending growth or housing sales; availability, timing, or effectiveness of Chinese stimulus policies; failure to realize the expected benefits of restructuring initiatives; further weakening in the U.S. high-efficiency gas boiler segment; material customer payment defaults, significant reductions in purchases, or loss of major customers due to bankruptcy or insolvency; foreign exchange fluctuations; failure to realize the expected benefits, timing, or scope of regulatory changes; competitive pressures facing the company’s business, including new technologies and new competitors; potential impacts of information technology or data security breaches; negative effects from changes in government regulations or regulatory requirements; inability to adapt to long-term trends toward decarbonization and improved energy efficiency; and adverse developments in the overall economic, political, and business environment in key global regions. Additional factors are described in the company’s filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2025, its Quarterly Reports on Form 10-Q, and its Current Reports on Form 8-K. Forward-looking statements in this press release are valid only as of the date hereof, 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 expressly qualified in their entirety by these cautionary statements.
About A. O. Smith
A. O. Smith Corporation, headquartered in Milwaukee, Wisconsin, is a global leader dedicated to applying innovative technologies and energy-efficient solutions to its manufactured and sold products 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 water heating equipment and boilers, as well as water treatment and water management products. For more information, visit www.aosmith.com.
About CPE
CPE is an alternative asset management firm with extensive experience in China and a global perspective. Leveraging a long-term horizon and value-oriented investment strategies, CPE delivers innovative investment solutions to leading enterprises across diverse sectors including the full AI value chain, advanced manufacturing, consumer goods, healthcare, and infrastructure. With a strong track record of long-term performance, CPE’s funds are supported by more than 200 domestic and international institutional investors from North America, Europe, Asia, and the Middle East. Its core investment team has completed over 300 global investments and maintains an outstanding performance record across multiple USD- and RMB-denominated funds, with total assets under management exceeding RMB 150 billion. This enables the firm to accumulate deep industry insights and an extensive business network. Through rigorous investment and research processes, strong sector expertise, and professional portfolio management capabilities, CPE builds long-term partnerships with portfolio companies to drive value creation and sustainable growth. CPE currently maintains offices in Beijing, Shanghai, Hong Kong, New York, London, Tokyo, and Abu Dhabi. For more information, please visit www.cpe-fund.com.