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

A. O. Smith Corporation (AOS) said on Oct. 27 it has signed definitive agreements to sell an 81% interest in its China business to CPE, a leading alternative asset manager. The company said in a news release that the business is valued at about $400 million on a cash-free, debt-free basis.

A. O. Smith will keep a 19% interest and enter into a long-term license for its brand in China. The company said both arrangements let it share in the business's future growth.

The China business is held through A. O. Smith (China) Investment Co., Ltd., the holding company for the operation. CPE will acquire the 81% equity interest in that company.

The agreements follow a strategic review of the China business that the company announced in July 2025. After evaluating a range of options, the board concluded that a transaction with CPE was the best path forward, the company said.

“We believe this transaction positions the China business for continued growth under experienced local ownership, while enabling A. O. Smith to focus resources on our highest-return opportunities and drive sustainable value creation,” said Chairman and Chief Executive Officer Steve Shafer.

The total value, including the net present value of ongoing licensing payments to A. O. Smith over the multi-decade period, is expected to exceed $500 million, the company said.

The structure will also let A. O. Smith repatriate about $80 million in cash that is currently held in China.

The company intends to prioritize share repurchases as a use of the after-tax proceeds and the repatriated cash after the deal closes.

Under the brand license, A. O. Smith will receive ongoing royalties from the China business. The company will also continue to cooperate with CPE on branding, product innovation and service quality.

The company said the sale sharpens its portfolio focus. It described the retained 19% stake as an upside opportunity.

CPE’s managing director, Liuwei Qin, also commented on the deal. “We are excited 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 its product innovation, service capabilities and customer relationships,” Qin said.

The transaction is expected to close in the first half of 2027, subject to regulatory approvals and other customary closing conditions.

Goldman Sachs & Co. LLC served as financial advisor and Latham & Watkins LLP served as legal counsel to A. O. Smith.

The release does not give the China business’s revenue or earnings in its text. The company’s slides on the transaction were posted to its Investors website and attached to the 8-K.

A. O. Smith will release third-quarter 2026 results on Oct. 29 and host a webcast call at 10:00 a.m. Eastern Daylight Time to discuss those results and its guidance for the rest of the year, the company said.