Melrose agrees terms on £1.5bn German acquisition
WARWICKSHIRE-based manufacturing turnaround specialist Melrose has agreed terms to acquire German firm, the Elster Group, in a deal worth £1.5bn.
The deal sees Mintford, a wholly owned subsidiary of Melrose, acquire the entire issued ordinary share capital of Elster. The acquisition will be implemented principally by a US tender offer to Elster shareholders at a price of $82 per Elster share – approximately $2.3bn or £1.5bn in aggregate – which is expected to begin on or about July 6, 2012.
Elster is a world leading engineering company and one of the world’s largest providers of gas, electricity and water meters, gas utilisation products and related communications, networking and software solutions.
Melrose said the acquisition represented a significant opportunity for it to execute its strategy of buy, improve, and sell.
In a statement, the Melrose board said it believed that Elster is a good manufacturing business with further potential which serves strong end markets with attractive long term demand drivers such as growing global energy demand, energy efficiency and conservation and global gasification.
It is also the global market leader in gas metering, Elster’s highest margin sector, supplying products to many parts of the gas supply chain including gas utilisation products.
The board said the deal also provided Elster with further opportunities to improve its performance.
These include: expanding profit margins, which have declined recently despite reasonable revenue growth; new gains from Elster’s recently announced restructuring programme, which the Melrose Board endorses; driving revenue growth in the higher margin product areas (gas metering and smart meters; improving the quality of the business through investment and development; and achieving cost savings if Elster is delisted from the NYSE.
Melrose said it expected the acquisition would be dilutive to earnings per share in the first full financial year of ownership (2013), and would begin to become accretive afterwards.
Melrose’s chief executive, Simon Peckham said: “We believe that Elster is an excellent fit with the Melrose acquisition criteria. Elster is a high quality business with strong end markets and the potential for significant development and improvement under Melrose management.”
Melrose’s chairman, Christopher Miller added: “We are pleased to reach agreement with the Elster board, who are recommending our offer. Since flotation in 2003 we have created over £1bn of shareholder value and we believe that this acquisition gives us further opportunity to continue our track record of creating significant value for our shareholders.”
