MILWAUKEE — A.O. Smith Corp. on April 3 completed its acquisition of GSW Inc., a Canadian-based manufacturer of water heaters and building products, with 2005 sales of $520 million (U.S.). It was acquired for $340 million in cash.

GSW is the parent company of American Water Heater, Johnson City, Tenn., which it purchased in 2002. American Water Heater also sells water heaters under the names American PROLine and U.S. Craftmaster.

GSW sells electric, gas, propane and oil-fired products to customers in the wholesale, retail and energy services channels across Canada, under the GSW and John Wood brand names.

The addition of GSW to A.O. Smith's existing water heater operations enhances A. O. Smith's position in the growing retail channel of the U.S. residential water heater market segment as well as increasing its presence in the Canadian water heater market, the company said.

"GSW is a very well-run business with talented people and productive operations in the U.S. and Canada," said Ajita G. Rajendra, president of A.O. Smith Water Products Co. "This combination of products, brands and people enhances A.O. Smith's status as one of the leading global suppliers of residential and commercial water heaters. "The addition of GSW's American Water Heater Co. partners us with Lowe's, one of the leaders in the home-improvement industry. As we integrate the GSW business, we intend to take advantage of our manufacturing capabilities to enhance our ability to serve the needs of our customers throughout the world."

A.O. Smith expects to generate savings of $3 million in 2006 resulting primarily from reduced administrative expenses and costs for raw materials. The company forecasts earnings accretion in 2006 from the acquisition, including these synergies, to total about 35 cents per share or $11 million after taxes.

The company projects synergy savings between $10 million and $15 million before taxes in 2007 as manufacturing and logistical efficiencies come on line.

A.O. Smith has acquired about 98% of both the outstanding Class A and Class B shares of GSW. The company intends to acquire the remainder of the shares not tendered by means of a compulsory acquisition under the Canada Business Corporations Act at the same price as the offer price.

Negotiations to buy GSW began last summer with the two majority owners of GSW stock. The sale had to be approved by GSW's board of directors and by U.S. and Canadian authorities.

At the time the proposed purchase was announced, American Water Heater President Robert W. Trudeau sent a letter to employees stating, "For American Water Heater Co., it will provide access to a broader commercial line of water heater products, provide access to western manufacturing and distribution facilities to aid in reducing transportation costs, provide greater scale to achieve cost savings and provide increased capacity to continue the growth we have achieved over the last three years."

GSW is made up of two business segments, water heating and building products. The water heater segment reported 2005 sales of $490 million (U.S.). The 2005 sales of the Building Products business were $30 million (U.S.). A.O. Smith announced that it would sell GSW Building Products, which manufactures vinyl gutter and downspout and vinyl railing products.

The American Water Heater business markets residential and commercial water heaters under the American PROLine and U. S. Craftsmaster brands. It is the exclusive supplier of water heaters to Lowe's, supplying residential gas and electric units carrying the Whirlpool brand.

American Water Heater began selling a flammable vapor resistant water heater, Flame Guard, more than three years before flammable vapor ignition resistant water heaters became mandatory in the United States.

In Canada, GSW manufactures residential and commercial water heaters under the GSW and John Wood brands at its plant in Fergus, Ontario, about 75 miles west of Toronto. Its Building Products business, located in Barrie, Ontario, about 70 miles north of Toronto, employs about 150 persons.

GSW employs more than 1,700 people at its three operating divisions in Canada and the United States.

A.O. Smith Water Products Co., with headquarters in Ashland City, Tenn., manufactures residential, standard and specialty commercial water heaters as well as high-efficiency boilers, hot water storage tanks and pump tanks.

In addition to its plant in Ashland City, A.O. Smith's North American facilities include plants in McBee., S.C.; Renton, Wash.; Stratford, Ontario; Charlotte, N. C.; Juarez, Mexico; Florence, Ky.; and Franklin and Cookeville, Tenn.

The company also has an international presence with an operation in Nanjing, China, and a plant in Veldhoven, the Netherlands.

A.O. Smith Water Products Co. reported record sales of $833 million in 2005. Including the 2005 sales of GSW, the water heater business would have recorded $1.3 billion in sales. With the addition of the company's $860 million Electrical Products business, A.O. Smith's 2005 pro forma consolidated sales would have totaled $2.2 billion.