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 The acquisition, Honeywell's largest in more than a decade, will
give the company access to Elster Group's niche technologies and
customers in the highly regulated heating, controls and metering
industries.
The business also creates "a new platform for acquisition targets",
Honeywell Chief Executive Dave Cote said in a statement on Tuesday.
Honeywell, which has set aside $10 billion for acquisitions by 2018,
said it was paying 12.6 times Elster's estimated 2015 consensus core
earnings.
The all-cash deal, expected to close in the first quarter of 2016,
would have a minor dilutive impact on Honeywell's 2016 earnings per
share, the company said.
A source familiar with the matter said that Honeywell had approached
Melrose this year. The two sides quickly began talks and no other
bidders were involved, the source said.
Melrose, an engineering turnaround specialist that buys businesses
with the intention of selling them on at a profit, said it would
return more than 2 billion pounds to shareholders after the sale.
Melrose Executive Vice-Chairman David Roper said the sale of the
entire Elster business, which the company acquired in 2012, had
happened sooner than planned. The market had expected the business
to be sold in parts.
"I think we've always said that, if an opportunistic bidder comes
along and offers tomorrow's price today, we will talk to them,"
Roper said.
Melrose's shares rose 16 percent to rank among the largest
percentage gainers on London's FTSE-250 <.FTMC> midcap index.
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Honeywell said in March 2014 that it would spend about $10 billion
on deals through 2018 as part of its five-year financial plan,
double its budget for the previous five years. The company has since
spent about $5.5 billion on acquisitions, including the Melrose
purchase, according to Thomson Reuters data.
The sale leaves Melrose with only one business -- Brush, a
manufacturer of electricity generating equipment.
Melrose Chief Executive Simon Peckham said the company was scouting
for an acquisition in the range of 2 billion pounds, preferably in
Northern Europe or North America. He declined to say when this might
happen.
Rothschild [ROT.UL] acted as lead financial adviser on the deal. JP
Morgan <JPM.N> also advised, while Investec acted as joint broker.
(Additional reporting by Sagarika Jaisinghani; Editing by Mark
Heinrich)
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