German engineering firm Elster Group SE (ELT: Quote) has agreed to be acquired by British manufacturing buy-out specialist Melrose Plc (MRO.L) for $2.3 billion or 1.5 billion pounds cash, the companies said Friday.
Melrose's unit Mintford AG would offer $20.50 per Elster's American Depositary Share or ADS and $82 per Elster share - both in cash in a US tender offer, which would commence on or about July 6.
In the offer, Elster's largest shareholder Rembrandt Holdings S.A., owned by funds advised by CVC Capital Partners, has agreed to tender its 17.41 million shares and the 531,025 ADSs owned by its unit. This collectively represents about 62 percent of Elster's share capital.
Private equity firm CVC Capital acquired Elster in 2005 from German utility E.ON AG (EONGY.PK) and took it public in New York in 2010. In mid-June, the Wall Street Journal had reported that Elster was put up for sale by CVC Capital Partners.
The ADS offer price represents a 48.6 percent premium over the closing price on June 11, the last day prior to press speculation that Rembrandt was considering selling its stake in Elster.
In a statement, Melrose said the acquisition represents a significant opportunity to execute its strategy of "buy, improve, sell." The deal would be dilutive to earnings per share in the first full financial year of ownership, and will start to become accretive thereafter. Over the medium term, the acquisition is not expected to be dilutive to the Melrose headline operating margins currently being achieved.
The companies said the closing of the tender offer is conditional upon tendering at least 75 percent of Elster's share capital and approval of Melrose's shareholders and regulatory authorities. The transaction is expected to close in the third quarter.
Elster, a provider of gas, electricity and water meters, employs more than 7,500 people and operates in more than 39 countries. The company sells its products to utilities, distributors and industrial customers. It generated revenues of $1.87 billion in 2011.
Following the deal closure, Elster expects to continue operating as an independent business. Melrose Chief Executive Simon Peckham and current Elster chief legal officer Thomas Preute will be its managing directors. Melrose CFO Geoff Martin will serve as CFO of Elster.
While, Elster Chief Executive Officer Simon Beresford-Wylie and Chief Financial Officer Rainer Beaujean plan to pursue other opportunities outside of the company.
In London, Melrose shares are currently trading at 374 pence, up 5.30 pence or 1.44 percent.
In the U.S., Elster shares closed on Thursday at $19.37, up $0.19 or 0.99 percent.
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by RTT Staff Writer
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