DealBook: Melrose Agrees to Buy German Utility Meter Manufacturer for $2.3 Billion

LONDON – The British investment company Melrose agreed on Friday to buy the Elster Group, a German utility meter manufacturer, for $2.3 billion.

Melrose, a London-based firm that specializes in acquiring underperforming manufacturing businesses, said it would offer investors in Elster $20.50 a share for the German company, a 48.6 percent premium on Elster’s closing share price on June 11 before the deal was first reported.

Elster, listed on the New York Stock Exchange in 2010, was previously owned by the private equity firm CVC Capital Partners, which bought the German company in 2005.

Europe’s sluggish economy has hurt many of the Continent’s companies, particularly in industries that are reliant on consumer spending.

Elster, which manufacturers meters for the electricity, gas and water industries, had announced a cost-cutting program as part of its efforts to tackle the economic downturn in Europe. Melrose expects to invest in Elster’s main business areas, as well as extract further cost savings from the company’s already announced restructuring plan.

“We believe that Elster is an excellent fit with the Melrose acquisition criteria,” Melrose’s chief executive, Simon Peckham, said in a statement. “Elster is a high quality business with strong end markets and the potential for significant development and improvement under Melrose management.”

Elster’s largest shareholder, Rembrandt Holdings, previously said it had reached an agreement with Melrose to sell its stake in the German company to Melrose.

Melrose said it would finance the deal through new debt and a rights issue of around $1.87 billion. Investors have already subscribed to around 60 percent of the rights issue, according to a person with direct knowledge of the deal.

Melrose’s rights issue is expected to be completed by the end of July. The deal for Elster is expected to close by Aug 31.

JPMorgan advised Melrose on the deal, and is underwriting the rights issue with Investec, Barclays, HSBC and Royal Bank of Canada. Rothschild and Deutsche Bank advised Elster.

Article source: http://dealbook.nytimes.com/2012/06/29/melrose-agrees-to-buy-german-utility-meter-manufacturer-for-2-3-billion/?partner=rss&emc=rss