Honeywell International Inc said it would buy the utility consumption meter business of Britain’s Melrose Industries PLC for ￡3.3 billion (US$5.14 billion) to boost its presence in high-growth regions.
Melrose shares jumped 16 percent in early trading yesterday, making it the top percentage gainer on the FTSE-250 midcap index.
The all-cash deal for Melrose’s Elster division would have a minor dilutive impact on its earnings per share next year, aircraft parts and climate control systems manufacturer Honeywell said in a statement.
Melrose, an engineering turnaround specialist that follows a buy-improve-sell strategy akin to private-equity firms, said separately that it would return ￡2 billion to shareholders after the sale.
“Elster’s gas business offers products in high demand among natural gas customers and brings a strong, global distribution network and numerous cross-selling opportunities for existing Honeywell technologies,” Honeywell International said.
Elster, which also makes flow computers and regulators for the gas industry, is estimated to post sales of US$1.8 billion this year. It employs about 6,800 people across the US, Germany, the UK and Slovakia.
“Elster also creates a new platform for acquisition targets for Honeywell,” Honeywell CEO Dave Cote said.
The deal value was set at about 12.6 times Elster’s estimated consensus core earnings for this year, Honeywell said.
AIRLINE SUPPLIES
Separately, British engineering company GKN PLC said it agreed to acquire Netherlands-based Fokker Technologies Group BV for 706 million euros (US$781 million) including debt, to improve its position as a supplier to airplane manufacturers.
GKN, historically a supplier of car parts which has over the past two decades moved into aerospace, yesterday said that it would fund the deal through a ￡200 million equity placing and through its existing debt facilities.
The acquisition would be earnings accretive in its first full-year, it said, and was expected to deliver cost savings of 3 percent of sales by 2018.
FOKKER PROGRAMS
GKN said Fokker’s position on two big air programs — the Airbus A350 and the Lockheed Martin F-35 military jet — complements its own position on the programs, adding that the deal gives it exposure to electrical wiring systems and extends its footprint in China.
“Fokker is an excellent strategic and cultural fit which supports our growth strategy. It strengthens GKN Aerospace’s market leadership, manufacturing footprint and technology,” GKN chief executive Nigel Stein said in a statement.
Reporting its half-year results, GKN said its pretax profit rose 4 percent in the period to ￡307 million, helped by growth in its auto-parts supply business, and reiterated its guidance that this year would be another year of growth.
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