Subscribe to RSS - Melrose


Nortek acquired

Wednesday, July 6, 2016

Melrose Industries Plc, a UK-based investment firm with a penchant for quick turnarounds, announced today that is has acquired Nortek, Inc., a global company with brands including 2GIG, NuTone and Elan. What this means for Nortek Security & Control, which specializes in residential security and home automation products and services, is still unclear.

As I wait to hear back from both Nortek and Melrose for more on the particulars of this deal, the big question is: What kind of impact will this have back here in the U.S., as Nortek is now in 18 million U.S. homes, and has positioned itself with the recent acquisition of Nuiku, a natural language processing company, as a leader in the area of smart home technology.

In a prepared statement, Nortek's president and CEO Michael J. Clarke said, "We are very pleased to have reached the proposed agreement with Melrose Industries, which represents a significant premium for our shareholders, We believe this partnership with Melrose will enhance Nortek's ability to further leverage its industry-leading brands and market positions to continue driving profitable growth. We believe this transaction will be a positive for our employees and customers alike."

From what I can see, Melrose has an excellent track record in investing in and improving businesses before reselling them within a two- to three-year window, and has been able to increase operating margins by five to nine percentage points in all of its historical investments.

Melrose's chief executive, Simon Peckham, said in a prepared statement that although Nortek “serves attractive end markets at good points in their cycle, with strong brands and market positions … 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."

Melrose's chairman Christopher Miller said in a prepared statement that since the firm’s inception it has created and returned more than £2.8 billion ($3.5 billion) of value to its shareholders and he believes that “Nortek presents an excellent opportunity to build substantially on that track record.”

The acquisition will be implemented principally by way of a cash tender offer to Nortek shareholders by Nevada Corp., a wholly owned subsidiary of Melrose. The offer price of $86 per Nortek Share, net, in cash and without interest, values the issued and outstanding shares of Nortek at $1.436 billion with an enterprise value of $2.810 billion.

Check back for more on this developing story, including interviews with Melrose and Nortek management.