Xylem, which manufactures equipment used in water and wastewater applications, reaffirmed its 2016 earnings forecast and said it expects the deal to add to its adjusted earnings in 2017.
Reuters exclusively reported earlier on Monday that the companies were nearing a deal.
Sensus, based in Raleigh, North Carolina, is a supplier of smart metering and related communications systems to the water, gas, heat and electric utility sectors. Its revenue was $837 in the year ended March 2016.
Xylem said the purchase price was 10.7 times Sensus's adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in fiscal 2016. Rye Brook, New York-based Xylem had revenue of $3.7 billion last year.
Sensus is one of the longest held investments in the history of private equity. Buyout firm Jordan Company, in partnership with Goldman Sachs's private-equity arm, acquired the company for $650 million in 2003.
Goldman's private equity business still owns 34 percent of Sensus, with Jordan Company owning the remainder.
Sensus's financial metrics have steadily improved since bottoming three years ago, driven by stronger end-market demand and comprehensive cost-cutting initiatives, ratings agency Moody's Investors Service Inc said earlier this year.
New product launches, combined with Sensus's restructuring efforts, should benefit operating results over the medium term, Moody's added.
Xylem had said in a recent investor presentation that it could deploy as much as $3.5 billion on mergers and acquisitions in the next five years, with any unspent cash being used to buy back stock.
Lazard is Xylem's financial adviser and Gibson, Dunn & Crutcher its legal adviser. Credit Suisse and Goldman, Sachs & Co are Sensus's financial advisers and Mayer Brown its legal counsel.