Melrose tables £1.1bn acquisition to fill the hole left by Elster sale
MELROSE Industries, the Warwickshire-based turnaround specialist, is preparing to make its first acquisition since the £3.3bn disposal of its Elster business last year.
The Melrose board said it had reached an agreement with US-based Nortek Inc. on a cash deal with values the business at £1,101m ($1,436m) and will see Melrose acquire the entire issued share capital of the company.
Melrose said the deal represented a significant opportunity to enhance value.
The Alcester company said earlier this year that with increasing uncertainty surrounding the world economy, the manufacturing sector was suffering from reduced investment levels.
It is interested that the group should have looked to the US for a suitable proposition rather than Europe, which had proved a happy hunting ground for the business.
Last year was an exceptional year in the company’s history with more than £2.6bn returned to shareholders following the disposal of Elster and the prior sale of portfolio business Bridon.
The Elster disposal had left a big hole in the company’s portfolio as three quarters of the group’s revenue was generated by the business, which is a world leader in measuring and improving the flow of natural gas, electricity and water.
Rhode Island-based Nortek is a leading diversified global manufacturer of innovative air management, security, home automation and ergonomic and productivity solutions.
Its common stock trades on the NASDAQ Global Market and for 12 months ended December 31, 2015, Nortek reported revenue and headline operating profit of $2,526.1m and $220.1m respectively, with North America representing 90% of 2015 revenue.
Melrose said in a statement to the London Stock Exchange announcing the deal: “The acquisition represents a significant opportunity for Melrose to continue to execute its strategy of acquiring specialised industrial businesses and maximising the value inherent in those businesses.
“Based on performance to date, Melrose has consistently identified attractive assets, enacted operational improvements and transacted at attractive valuation levels and points in the cycle. The acquisition represents a significant opportunity for Melrose to execute its strategy of ‘buy, improve, sell’.
“The Melrose board believes that, through its strong track record and experience, it can support and assist to improve Nortek’s financial performance and to grow the (group) businesses to their fullest potential. The directors believe that the proposed acquisition of Nortek fits well with Melrose’s strategy and presents an excellent opportunity for Melrose and its shareholders.”
It expects the business to be earnings enhancing in its first full year of ownership.
