A little more than seven years after acquiring Aquatic Eco-Systems (AES), which reports itself to be the world’s leading supplier of aquatic products and systems worldwide, and just as the recirculating aquaculture system (RAS) industry appears to be taking off, Pentair is shutting down at least portions of the business, Undercurrent News has learned.

The word was delivered on Thursday to roughly 35 employees at AES’ main operations in Apoka, Florida, informing them that their layoff will go into effect on June 5. The giant $2.9 billion water and electrical equipment manufacturer later confirmed the news in an email to Undercurrent:

"Pentair announced today that we have made the decision to shut down portions of our aquaculture business, as well as our intent to strategically position other portions of the aquaculture business for sale," the message reads.

The company offered the following explanation for its move: "While we believe the aquaculture business offers attractive long term opportunities, the short-term business model does not meet our expectations," it said in its email.

In spin-off mode

Pentair, which is London, UK-based and publicly traded on the New York Stock Exchange (PNR), has been in spin-off mode recently.

The company had sales of $4.9bn in 2017 before selling off a big part of its electrical business, known as valves and controls, for $3.15bn last year. It declared at the time that it aims to become a “pure play water company” with three divisions: Aquatic Systems, Filtration Solutions and Flow Technologies.

Aquatic Systems, which includes solutions for residential and commercial swimming pools in addition to aquaculture, contributed $1.03bn to the company’s 2018 sales.

But this division has the smallest order backlog out of the three divisions, $80m in 2018 out of a companywide backlog of $332m, In 2017, aquatic systems had a backlog of $110m out of a companywide backlog of $406m.

Aquaculture revenues are not broken out in the company’s financial reports but the business appears to be a sideline to pool sales. The word “pool” appears 19 times in Pentair’s 95-page 2018 annual report while the word “aquaculture” only appears twice.

Earlier this month it announced that it was closing its small aquaponics operation, Urban Organics, in the US state of Minnesota, and letting go of 27 employees. Similarly, Pentair pointed to a below expectations performance.

Started by a Navy SEAL

Founded in 1978, in Apopka, by Robert “Bob” Heideman, a former Navy SEAL, AES was acquired by Pentair in late 2012 and folded into the company’s Aquatic Systems global business unit. Robert Miller, AES’ chief financial officer, was tasked with running the aquaculture business. Terms of the deal were not disclosed.

Heideman, who had served as president until 2007, had passed away in 2008 after a year-long battle with lung cancer.

"Combining our world-class operational processes, investment capabilities and global reach with AES’s extensive aquatic product offerings, systems and their in-house team of biologists, engineers and technicians, creates a comprehensive resource for aquaculture technology, equipment and engineered solutions", said Karl Frykman, then president of Pentair’s Aquatic Systems, at the time of the acquisition.

Pentair, in subsequent years, made additional acquisitions to beef up its AES division, including Vaki Aquaculture Systems, a leading aquaculture equipment manufacturer based in Kpavogur, Iceland, in 2016. Vaki focuses on the design and manufacture of fish handling, counting and grading solutions for a variety of aquaculture applications, offering technology applications for estimating biomass.

AES reported, in recent literature, to sell more than 13,000 products to the aquaculture, lake management and water garden industries. It said it maintained staff of over 20 technicians and biologists to "provide service, expert advice, troubleshooting and custom design solutions to hobbyists and professionals alike".

It maintained a 12,400 square feet of laboratories and fish culture systems in its Apopka headquarters, known as the World Aquaculture Technology Engineering & Research) Center.

But not for much longer.

"Pentair is looking to focus its Aquatic Systems segment on its core competencies in the residential and commercial pool segments. In that regard, we are continuing our investment in our customer service and technical service capabilities and other resource capabilities at the AES facility, in Apopka, Florida, to advance our vision and strategic priorities in the commercial and residential pool markets," the company said Thursday, in its email to Undercurrent, further expounding on its explanation.

"Pentair has begun the process to market and sell portions of the aquaculture business including the legacy Vaki business, Chile operations and the online catalog operation, which we plan to operate business as usual as we navigate through the sale process," the company said.

Ideal Fish sheds Pentair investment just in time

Without AES, more than a half dozen established recirculating aquaculture system producers in the US are going to have to find other sources for pumps, tanks and other equipment, one source told Undercurrent.

One RAS company that was breathing a sigh of relief on Thursday, however, was Ideal Fish, a recently launched Waterbury, Connecticut producer of Mediterranean sea bass, referred to as branzino in the US market. Ideal Fish was previously 70% owned by Pentair but, roughly a week to 10 days ago, closed a deal with a new group of investors to cut its ties with the water company, a spokesman for Idealfish informed Undercurrent on Thursday.