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Pentair Shuts Down Aquaculture Business, Divests Vaki Unit

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Pentair Plc (PNR - Free Report) has divested its Vaki business unit, a maker of fish farming and wild fish conservation monitoring equipment, to Merck & Co. Inc.’s (MRK - Free Report) Animal Health division.

Vaki falls under Pentair’s Aquatic Eco-Systems Division, which is specialized in aquaculture-related products and services. Vaki is the provider of fish handling, counting and grading solutions.

Following the divesture, Vaki will be a leading brand under the Biomark business within Merck Animal Health, dedicated to provide equipment, technology and products for fish counting and size estimation from freshwater to saltwater rearing, while also collecting data for each stage of fish production. Vaki has significant potential for development in the aquaculture industry and partnering with Merck Animal Health will support its further growth.

In May, the water treatment company agreed to sell its Vaki unit, thus exiting the aquaculture business and selling related units in an effort to focus on the residential and commercial pool segments. The aquaculture business provides service, equipment and technology for the aquaculture industry. The company also stated that though its aquaculture business offers attractive long-term opportunities, the short-term business model does not meet the company’s expectations.
Pentair has undergone certain business restructuring initiatives aimed at reducing fixed cost structure and commenced business realignment. These actions will contribute to margin growth for the current year.

In order to fuel its growth rate, Pentair plans to make some incremental investments in the Aquatic Systems business. The company continues to increase product introductions, inclusive of smart technologies. More than 5 million installed in-ground pools currently have some form of automation system, representing ample opportunities for growth. Further, with around 50% of pools being more than a decade old, the need to upgrade will drive Pentair’s top line.

However, the wet and cold weather have delayed pool construction activity in several of Pentair’s key markets. As a result of slower sell-through, inventory levels did not drop as expected.  Consequently, the Aquatic Systems segment’s fourth-quarter results will likely be impacted.
Pentair plans to expand particularly in the areas of pool and residential and commercial water treatment through acquisitions, and focus on China and Southeast Asia. In sync with this, Pentair acquired Aquion, which will help the former expand scope and customer offerings in the residential and commercial water treatment arena. Pentair has also acquired Pelican Water Systems which provides residential whole-home water treatment systems. Pelican Water Systems adds new and complementary products and services to the Pentair portfolio, enabling it to meet consumers’ residential water needs.

Share Price Performance

Shares of Pentair have gained 21.2% in the past year compared with the industry’s growth of 51%.

Zacks Rank & Stocks to Consider

Pentair currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector are Northwest Pipe Company (NWPX - Free Report) and Tennant Company (TNC - Free Report) . All of these stocks sport a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today's Zacks #1 Rank stocks here.

Northwest Pipe has an expected earnings growth rate of 15.8% for the current year. The stock has appreciated 43.8% over the past year.

Tennant has a projected earnings growth rate of 29.8% for 2019. The company’s shares have rallied 44.2% over the past year.

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