MILWAUKEE – October 29, 2026 -- A. O. Smith Corporation (NYSE: AOS) agreed to sell an 81% interest in its China business to alternative asset manager CPE, valuing the unit at approximately $400 million on a cash-free, debt-free basis. The company will keep a 19% stake and sign a long-term brand licensing agreement.
Licensing royalties lift total deal value above $500 million
The $400 million valuation excludes the royalty stream from the brand license. Including the net present value of licensing payments to A. O. Smith over a multi-decade period, total value is expected to exceed $500 million.
The structure also lets A. O. Smith repatriate roughly $80 million in cash now held in China.
Share repurchases take priority for after-tax proceeds
After closing, A. O. Smith intends to prioritize share buybacks as the use of after-tax proceeds and repatriated cash.
The agreements follow a strategic review of the China business that the company announced in July 2025. The board concluded that a transaction with CPE was the best path for the unit, the company and its shareholders.
CPE acquires the holding company behind A. O. Smith's China operations
CPE will take 81% of A. O. Smith (China) Investment Co., Ltd., the holding company for the China business. A. O. Smith will earn ongoing royalties for the A. O. Smith brand in China.
As brand owner and minority shareholder, A. O. Smith will continue to cooperate with CPE on branding, product innovation and service quality. Chairman and CEO Steve Shafer said the sale lets the company focus resources on its highest-return opportunities. He also described the China market as challenging.
CPE brings multinational China experience and RMB 150 billion in assets
CPE invests across the AI value chain, advanced manufacturing, consumer, healthcare and infrastructure. Its recent partnership with Restaurant Brands International on the Burger King China business is cited as precedent for working with multinationals in China.
The firm's funds are backed by more than 200 institutional investors across North America, Europe, Asia and the Middle East. Its core team has completed more than 300 investments, and total assets under management exceed RMB 150 billion. CPE Managing Director Liuwei Qin said the firm will invest in product innovation, service capabilities and customer relationships.
Closing is targeted for the first half of 2027 pending regulatory approvals
The transaction is subject to regulatory approvals and other customary closing conditions. A. O. Smith's risk disclosures name failure to obtain those approvals as a factor that could change the outcome.
Goldman Sachs & Co. LLC served as financial advisor and Latham & Watkins LLP as legal counsel to A. O. Smith.
A. O. Smith will report third-quarter results on Oct. 29, 2026, with a webcast call at 10:00 a.m. Eastern Daylight Time covering results and guidance for the rest of the year.