Ionics, Incorporated

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Ionics, Incorporated

65 Grove Street
Watertown, Massachusetts 02472-28821
U.S.A.
Telephone: (617) 926-2500
Fax: (617) 926-4304
Web site: http://www.ionics.com

Public Company
Founded: 1948
Employees: 2,100
Sales: $466.7 million (2001)
Stock Exchanges: New York
Ticker Symbol: ION
NAIC: 333319 Other Commercial and Service Industry Machinery

Ionics, Incorporated is a leading water purification company active throughout the world in the supply of water and water treatment. The company purifies water using desalination membranes, which it invented and patented in the 1950s. Its products are used by customers and the company itself to desalt brackish water and seawater. Ionics is organized into four business groups: the Equipment Business Group, the Ultrapure Water Group, the Consumer Water Group, and the Instrument Business Group. The Equipment Business Group makes up 44 percent of the company’s sales and designs, engineers, and constructs advanced membrane-based, conventional, and thermal-based water- and wastewater-treatment systems for municipalities and industrial customers. These customers include the beverage, automotive, and chemical processing industries. The Consumer Water Group accounts for about 27 percent of the company’s business. It sells home water-purification systems and also markets consumer bleach-based products. The Ultrapure Water Group, which constitutes 23 percent of sales, provides water needed to rinse silicon wafers, microchips, and discs for hard drives. The Instrument Business Group accounts for the remaining sales and produces analyzers to measure water contamination. Ionics’ revenues spiked in 2001 when it sold its Aqua Cool Pure Bottled Water subsidiary to Perrier Vittel S.A. for $200 million. During the same year, the company also entered into a partnership to provide 79 million gallons of purified water per day to Kuwait.

A Vision in 1948

Ionics grew out of fear that the fresh water supply on Earth was diminishing to the point that there might not be enough to sustain life in the future. The company was founded in 1948 by a group of scientists and engineers from the Massachusetts Institute of Technology (MIT) and Harvard. They invented the ion-exchange membrane, which they used to desalinate, or remove salt from, water. The membrane could also be used to remove other chemicals from water and clean brackish (somewhat salty) water. The group received a patent for its membrane in 1950 and was featured on the front page of the New York Times in 1952.

While the world did not run out of fresh water, there was certainly a shortage of clean water in certain areas, especially in the Middle East. The first membrane was installed for commercial purposes in Saudi Arabia in 1954.

The success of the desalination techniques led the company to develop a broad range of processes utilizing different separation methods. These methods removed various contaminants from water and could be used in different parts of the United States where fresh water had become contaminated. In 1957, Ionics installed its first water-treatment system in the United States. This system desalted a portion of the water supply in Coalinga, California. A few years later, a system was installed in Buckeye, Arizona, to clean the entire water supply there. The company continued to expand overseas while growing in the United States. In 1969, the world’s largest brackish-water treatment plant was installed in Siesta Key, Florida. By this time, Ionics had sold hundreds of desalination systems to clean the water in the Middle East.

ED and EDR in the Early 1970s

Ionics invented ion-exchanged membranes for use in water treatment along with electrodialysis (ED), a process that uses these membranes to desalt concentrated solutions. With ED, salts in the water became either positively or negatively charged ions. ED created a semipermeable barrier that allowed the passage of either the positively charged ions or the negatively charged ions. It then excluded the ions with the opposite charge. Eliminating one type of ion helped rid water of salts.

Ionics invented the electrodialysis reversal (EDR) process to deal with the problem of membranes becoming dirtied or scaled over time. By reversing the electrical current, this buildup was removed. Both ED and EDR were significant developments in the water-processing industry and were still used as of 2002. Ionics opened its first commercial ED plant in Malaga, Spain, in 1972.

Cloromat and Aqua Cool Pure Bottled Water

The company unveiled its award-winning Cloromat system in 1973. Cloromat manufactured sodium hypochlorite, a chemical used to disinfect drinking water. The first Cloromat system was used to sterilize water and wastewater in Manchester, New Hampshire. Cloromat systems were sold worldwide for about 13 years. Around this time, the company entered the consumer bleach market in Brisbane, Australia, with subsidiary Elite PTY Ltd. This was the first of many successful company endeavors in Australia.

Ionics entered the bottled-water market in 1984 when it introduced its Aqua Cool Pure Bottled Water. The bottled water was eventually sold in 33 locations in the United States. Ionics was commended for the ten million gallons of Aqua Cool it donated to American and British troops during Operation Desert Storm and Operation Desert Shield.

Despite Aqua Cool’s annual $70 million in sales, Ionics sold the business in 2001 to Perrier-Vittel S.A., a subsidiary of Nestlé, S.A., for $220 million. Explained Arthur L. Goldstein, chairman and chief executive officer of Ionics: “Ionics is selling its Aqua Cool Pure Bottled Water business, primarily to enable greater corporate focus on its activities in water desalination, water reuse, surface-water purification, ultrapure water and water-quality instrumentation. These growing businesses, in which Ionics is a world leader, are based on Ionics’ core technologies in membrane-based water treatment and are expected to require substantial resources and capital commitments in the future.”

Pure Thoughts for the New Millennium

In 1998, Ionics celebrated its 50th anniversary. In 1999, as it headed into the millennium, Ionics began construction on a water-desalinization plant in Barbados using reverse osmosis technology. Barbados was one of the most water-scarce countries in the world, and RO technology would help alleviate present and future drought. The plant was built in Spring Garden, St. Michael. One year later, it produced fresh drinking water for 20 percent of Barbados’ 264,000 residents.

Reverse osmosis (RO) technology was an energy-efficient method of filtering salts from brackish water and seawater to meet EPA requirements for surface water treatment and safe drinking water. It cleared away natural organic and mineral substances, as well as pollutants, and greatly reduced the occurrence of bacteria, viruses, salts, nitrates, pesticides, color, and hardness in water. Ionics’ RO technology was used all over the United States, as well as in Italy, the Caribbean, the Canary Islands, and Malaysia to produce high-quality process and drinking water. Many nuclear and fossil-power producers, pharmaceutical and petrochemical manufacturers, and public-water suppliers throughout the world used this technology.

Patent Troubles and a Profitable Consortium in 2001

On April 23, 2001, Ionics announced that three lawsuits brought against the company by United States Filter Corporation (U.S. Filter) had been settled. The lawsuits had alleged infringement of certain patents relating to electrodeionization (EDI) and one patent related to an application utilizing RO technology.

EDI technology was used by water purification companies to consistently remove impurities in water without using hazardous chemicals. It was cheaper for the consumer than other technologies and was highly efficient. When RO was used as a pretreatment method, EDI removed over 99.9 percent of feed-water ions. EDI technology was used to purify water for semiconductor chip manufacturing and hard disc drives, and to generate power in the United States, France, Northern Ireland, Italy, China, Japan, Taiwan, and Canada. Ionics opted to settle the lawsuits, agreeing to make payments to U.S. Filter. Under the terms of the settlement, Ionics did not have to give up any of its rights with respect to its existing EDI technology.

Arthur L. Goldstein, Ionics’ chairman and CEO, stated: “We are pleased to have resolved this litigation in such a satisfactory manner, bringing to an end a process that had become both expensive and a burden on management time. The settlement gave no future adverse financial impact on the company, and we remain free to continue all of our current activities in the EDI and RO fields.” Goldstein also noted: “We have been very pleased by the commercial success of our EDI products in the microelectronics, power and other markets, and we fully intend to continue our long-term commitment to the development of this technology.”

Also in 2001, Ionics became part of a consortium with Mohammed Abdulmihsin Al-Kharafi & Sons Co. The consortium was awarded a $380 million contract to supply Kuwait with 79 million gallons of water a day. The contract was the largest ever for a membrane system used for water reuse. The Kuwaiti plant converted wastewater into water usable for agriculture and irrigation. Ionics’ role in the venture was to supply the membrane systems and operate the membrane facility.

Company Perspectives:

To be a leading provider of clean and purified water as well as a supplier of equipment and systems for water and wastewater treatment worldwide. This will be accomplished by anticipating and meeting the water quality needs of people, industry, and our environment; and by utilizing proprietary separation technologies and innovative marketing, distribution and financing methods to provide customers with products and services which deliver superior value.

In 2002, Ionics started the largest seawater RO desalting plant in the Western Hemisphere, located in Trinidad, WestIndies. During the same year, the company began an ultrafiltration (UF) system in Minneapolis that supplied the city’s population of 500,000 with 70 million gallons of filtered water a day. A completion date was set for 2004.

Ionics’ vision for the future was to preserve and enhance the environment and the overall quality of life around the globe. As of 2002, with the ever increasing population, as well as the constant need for clean water, Ionics implemented a strong and necessary focus on pollution prevention and education. CEO Arthur Goldstein stated, “I believe that if responsible progress is to be made we need to create some type of real or virtual partnership among the parties with an interest in or an obligation to our water resources.” He then went on to add, “State and federal governments are beginning to show signs of realizing that the long-held concept of fixing blame is not the way to solve pollution-related problems.”

Ionics was also working on a new technology called ‘ Tonics EDR 2020.” It removed more minerals and salt (50 to 90 percent) than older technologies, and was surprisingly more affordable because it had an increased membrane area, allowing use of fewer membranes. It was mainly used to purify brackish water for drinking and for demineralization of waters used for industrial processes. Ionics was at the forefront of the industry and would most likely continue to climb as it developed more innovative technologies to make the earth a cleaner place to live.

Principal Subsidiaries

Ionics Pure Solutions; Ionics Apollo Ultrapure Water; Ionics Fidelity Purewater; Ionics Sie vers Instruments; Ionics Aqua Design Incorporated; Aqua Cool Pure Bottled Water; Elite Consumer Products; Ionics Life Sciences, Incorporated; Ionics Ahlfinger Water; Ionics Resources Conservation.

Principal Operating Units

Equipment Business Group; Ultrapure Water Group; Consumer Water Group; Instrument Business Group.

Principal Competitors

Osmonics, Inc.; United States Filter Corporation; ZENON Environmental, Incorporated.

Key Dates:

1948:: Ionics, Incorporated is founded by a group of scientists and engineers.
1949:: First desalination membrane is made.
1950:: First patent is received on membrane.
1952:: Ionics’ membrane is featured on the front page of the New York Times.
1957:: First U.S. municipality installs membrane desalting plant.
1969:: World’s largest brackish water-treatment plant is installed at Siesta Key, Florida.
1971:: Ionics installs largest brackish-water desalting plant in Europe in Brindisi, Italy.
1972:: Company opens first commercial Electrodialysis (ED) power plant in Malaga, Spain; first ED plant in petrochemical industry opens in North Africa.
1984:: Ionics introduces Aqua Cool Pure Bottled Water.
1990:: Motorola selects Ionics to design and build two advanced water systems for major new semiconductor processing facilities in Texas and Arizona.
2001:: Company is part of consortium awarded $380 million contract for a water reclamation facility in Kuwait; Aqua Cool business is sold to Perrier Vittel S.A. for $200 million.
2002:: Ionics starts the largest seawater RO desalting plant in the Western Hemisphere in Trinidad, West Indies.