A.O. Smith has reached a definitive agreement to acquire State Industries, a privately held manufacturer of residential and commercial water heaters. Subject to government approval, A.O. Smith will pay $58 million for all of the outstanding shares of State Industries and assume about $51 million of its debt in an acquisition expected to conclude in December.

The transaction includes APCOM, a subsidiary of State Industries that manufactures elements, thermostats, drain valves and other water-heater components. Currently it supplies these components to four of the six largest North American water-heater manufacturers. This will represent a new business opportunity for A.O. Smith.

State Industries, based in Ashland City, Tenn., reported sales of about $325 million for fiscal year 2000. In addition to its headquarters facility, State has plants in Franklin and Cookeville, Tenn., and Charlotte, N.C. It employs about 2,200 people.

"This acquisition would nearly double the size of A.O. Smith's water-heating business and would expand the breadth and depth of our product line," Robert J. O'Toole, chairman/CEO, said in a statement.

A.O. Smith Water Products Co., based in Irving, Texas, manufactures residential water heaters, standard and specialty commercial water heaters, copper tube boilers, pump tanks and expansion tanks. It employs about 2,500 people worldwide. The company has facilities in McBee, S.C.; Renton, Wash.; El Paso, Texas; Florence, Ky.; Alsip, Ill.; Juarez, Mexico; Veldhoven, the Netherlands; Stratford, Ontario, Canada; and Nanjing, China.