CoolIT Systems Inc., a fast-growing Calgary-based cooling technology supplier to the data centre industry, has been sold to a U.S. public company in one of the largest exits ever in Canada’s technology sector.
Ecolab Inc. ECL-N of St. Paul, Minn., said Friday it had purchased CoolIT from private equity giant KKR & Co. Inc. and Abu Dhabi-based sovereign wealth fund Mubadala Investment Co. for US$4.75-billion in cash, amounting to 29 times the company’s forecast adjusted operating earnings for the next 12 months.
The deal is one of the biggest takeouts of a Canadian technology company in at least the past 20 years. IBM bought Ottawa-based Cognos for US$4.9-billion in 2007, while UnitedHealth Group Inc. bought Canadian-domiciled Catamaran Corp. 11 years ago for US$12.8-billion.
The CoolIT deal is a massive win for KKR, which bought the company in 2023 for US$270-million, just as spending on massive global data centres supporting the widespread adoption and use of artificial intelligence was about to take off. The same boom has also contributed to a huge increase in revenues, profits and stock-market value for Toronto-based Celestica Inc. CLS-T, a key technology vendor to hyperscalers – tech giants such as Google and Facebook – who are leading the data-centre build-out.
The deal, which is expected to close in the third quarter, will also result in a big payday for CoolIT’s 401 full-time employees, who participate in an employee ownership program called OwnIT.
“AI is transforming the demands on data centres, and liquid cooling is one of the critical technologies that makes advanced computing possible,” said Ecolab chairman and chief executive officer Christophe Beck in a release.
“By bringing together CoolIT’s engineered cooling technologies with Ecolab’s expertise in water, chemistry and digital service, we can provide our customers a complete cooling solution that improves performance and reliability while reducing water and energy use.”
He added that the acquisition “positions Ecolab as the partner that the world’s largest technology companies rely on to grow responsibly and sustainably” as the global AI ecosystem gets built out.
A KKR spokesperson declined to comment.
Ecolab, a New York Stock Exchange-listed provider of water, hygiene and infection-prevention products and services with US$16-billion in annual sales, said the addition of CoolIT would “significantly strengthen” growth in its global high-tech business and increase its overall organic sales growth rate by 1 per cent. It is also expected to increase Ecolab’s expected adjusted earnings in 2028 “with the contribution building significantly thereafter,” the buyer said in a release.
CoolIT was founded 25 years ago. It originally made liquid cooling technology for gaming computers before expanding in 2012 to serve the supercomputer business, and the burgeoning artificial intelligence business a decade later.
It produces radiator-like systems consisting of coldplates and closed-loop liquid circuits used to cool graphics processing unit and central processing unit chips as well as artificial intelligence accelerators.
CoolIT has seen demand for its products soar since the launch of ChatGPT in late 2022 became one of the most disruptive technology events since the launch of the iPhone or start of the dot-com boom. Its annual revenue is expected to reach US$550-million over the next 12 months, Ecolab said. CoolIT’s explosive growth has established it as one of Canada’s largest privately held technology companies in recent years, and one of at least 25 to surpass US$300-million in annual revenues, according to a recent Globe and Mail survey.
The Calgary company’s technology is used in seven of the top 10 supercomputers and the company’s customers include four of the top five server manufacturers and four of the five hyperscaler tech giants leading the data-centre construction wave. The company has more than 650 employees and 120 patents and manufactures in Canada, China and Vietnam. It has a second headquarters and engineering lab in Taiwan.
Construction of data centres is booming, mostly in the United States, to support the development and adoption of AI. Efficient cooling systems are crucial to these facilities. The sophisticated computer chips that are used to build and run AI models are getting more powerful and consuming more electricity, and can generate intense amounts of heat.