Melrose surges on Elster disposal, plans to return over £2bn to shareholders
Melrose Industries rocketed 11% after saying it has entered into an agreement to dispose of its Elster business to Honeywell International for a cash consideration of £3.3bn and announcing plans to return over £2bn to shareholders.
FTSE 250
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17:14 18/04/24
FTSE All-Share
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Industrial Engineering
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Melrose Industries
630.60p
16:49 18/04/24
The company said the consideration is payable in cash on completion and implies a multiple of 3.1 times 2014 revenue and 14.3 times 2014 headline earnings before interest, tax, depreciation and amortisation.
Melrose said it intends to use the proceeds to finance a return of capital of over £2bn to shareholders in due course and for general corporate purposes, including paying down existing borrowings.
Chairman Christopher Miller said: “"The disposal of Elster represents an excellent outcome for Melrose shareholders and another milestone in our track record. Through investing heavily and improving operational performance we have created substantial value for shareholders, more than doubling their money in three years.
"I am pleased that we are able to deliver this return to shareholders earlier than we had originally anticipated and have every confidence that Elster will continue its success story under the ownership of Honeywell. In the ten years since our first investment we have created well over £2bn of shareholder value. We look forward to beating that performance over the next decade."
RBC Capital Markets, which rates the stock at 'outperform', said: “As a reminder, Melrose paid £1.8bn for Elster just under three years ago, so this represents an excellent return for shareholders.”