Honeywell has signed an agreement to acquire the Elster Division of Melrose Industries for $5.1 billion.
Elster provices thermal gas solutions for commercial, industrial, and residential heating systems and gas, water, and electricity meters, including smart meters and software and data analytics solutions. The company also manufactures flow computers and regulators for the gas industry.
Elster consensus sales for 2015 are estimated to be $1.8 billion. The price translates to approximately 12.6 times Elster’s estimated 2015 consensus earnings before interest, taxes, depreciation, and amortization (EBITDA)
The companies expect to close in the first quarter of 2016, pending customary closing approvals, including regulatory review and Melrose shareowner vote.
“The acquisition of Elster will generate strong future returns for Honeywell’s shareowners because it increases our growth profile globally – creating both organic and inorganic growth opportunities – and because Honeywell can run this company effectively and accelerate its growth through our complementary technologies, software knowledge, and presence in high growth regions,” said Honeywell Chairman and CEO Dave Cote.
Cote said that Honeywell sees energy efficiency initiatives and mandates creating an increased need for natural resource management that will drive meaningful and sustained growth for meters.
“Utility metering in particular is rapidly evolving as new ‘smart’ technologies and software and data analytics capabilities are becoming adopted around the world and we expect strong growth from this segment globally. Elster’s differentiated technologies, extensive industry expertise, and relationship with utility customers globally – combined with their strong positions in the highly regulated heating, controls, and metering segments – are a great fit for Honeywell’s portfolio,” Cote said
During the past decade, Honeywell has completed more than 80 acquisitions, adding about $12 billion in revenues.
“We will continue to look for good acquisitions to enhance our growth profile. We see Elster as a great opportunity to deploy our operating model and key process initiatives to grow the business, enhance our position globally, and drive significant returns to shareowners over the long-term. The Honeywell Operating System (HOS) will be a major factor in creating new synergies that will increase the growth and profitability of each of Elster’s businesses,” Cote said.
Elster employs approximately 6,800 people with major locations in the United States, Germany, the United Kingdom, and Slovakia.
Honeywell is a Fortune 100 diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services; control technologies for buildings, homes, and industry; turbochargers; and performance materials.
