UK-based Melrose Industries announced that it will acquire American home security and ventilation products maker Nortek for $2.81 billion, including debt.
Shares in the British company surged as much as 42 percent to a record 580.5 pence per share after news of the deal went public.
The offer price of $86 per Nortek Share, net, in cash and without interest, values the company at $1.436 billion (£1.101 billion) with an enterprise value of $2.810 billion (£2.154 billion).
The amount offered represents a premium of approximately 37.6% to the closing price of a Nortek Share on July 5, 2016 and approximately 81.3% to the average price of a Nortek Share in the six month period ending on July 5, 2016.
Melrose, a public limited company registered in England and Wales, focuses on acquiring manufacturers businesses with strong fundamentals whose performance can be improved.
Nortek one of the world’s leading manufacturers of air management, security, home automation and ergonomic and productivity solutions.
Melrose’s Chief Executive, Simon Peckham, said:
“Nortek is a high quality manufacturing business with over 90% of its turnover in North America and product penetration into 80% of US households. It serves attractive end markets at good points in their cycle, with strong brands and market positions.
Nonetheless there remains solid potential for further improvement under Melrose’s guidance. Our ability to apply our industrial experience and investment expertise, as well as to liberate Nortek from its current capital structure will transform the prospects of the business. Our team is excited about getting to work to achieve these results as soon as possible.”
Melrose’s Chairman, Christopher Miller, added:
“This represents the next chapter in the Melrose story. Since formation we have created and returned over £2.8 billion of value to our shareholders and we believe that Nortek presents an excellent opportunity to build substantially on that track record.”
The Tender Offer is expected to commence by no later than July 11, 2016.
It is possible that there could be a counter bid for Nortek by another company though. Last year The Wall Street Journal reported that United Technologies Corp was interested in Nortek.
Unusual example of post-Brexit M&A
A source close to Melrose was quoted by Reuters as saying:
“Melrose is an unusual example of post-Brexit M&A. Only the brave can pull off deals in this environment,”
“Some investors are prepared to take on more risk because they have cash to deploy but it’s challenging to find a business proposition that still works. The economic impact of Brexit is still unclear,” he added.