Honeywell has signed a definitive agreement to acquire the Elster Division of Melrose Industries plc for approximately $5.1 billion. The acquisition is expected to occur in the first quarter of 2016 and the agreement is subject to customary closing conditions, including regulatory review and Melrose shareowners' vote.
Elster is a leading provider of 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. It also manufactures flow computers and regulators for the gas industry.
With Elster consensus sales for 2015 estimated to be $1.8 billion, the purchase price translates to approximately 12.6 times Elster’s estimated 2015 consensus EBITDA.
“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,” Honeywell Chairman and CEO Dave Cote said in a statement.
Elster also creates a new platform for acquisition targets for Honeywell that will be additive to the business’ growth and global presence, he said, adding, "We will see immediate benefits to Honeywell’s portfolio, accelerating into 2016 and 2017."