Two weeks after confirming speculation that it was interested in German engineering group Elster, buy-out firm Melrose said that it is looking to take over the firm by spending 2.3bn dollars, or 1.5bn pounds.
The recommended acquisition will be implemented principally by a US tender offer to holders of Elster ADSs and Elster shareholders at a price of $20.50 per Elster ADS or $82 per Elster shares which is expected to commence around July 6th.
The offer price is 48.6% higher than the closing price of Elster ADS on June 11th, the last day before rumours about an Elster sale began.
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"We believe that Elster is an excellent fit with the Melrose acquisition criteria. Elster is a high quality business with strong end markets and the potential for significant development and improvement under Melrose management," said Melrose's Chief Executive Simon Peckham.
Elster is one of the world's largest providers of gas, electricity and water meters, gas utilisation products and related communications, networking and software solutions.
Melrose will finance the acquisition and expenses through a combination of new debt and by way of a fully underwritten rights issue of two new Melrose ordinary shares for each one Melrose existing ordinary share at 142p, raising £1.2bn, before expenses. After meeting with institutional shareholders, the company has already been informed by its underwriters that certain shareholders have already committed to sub-underwrite more than 60% of the rights issue.
Melrose said that the purchase will be dilutive to earnings per share in 2013, the first full financial year of ownership, and will start to become accretive after that.
Chairman Christopher Miller said: "We are pleased to reach agreement with the Elster board, who are recommending our offer. Since flotation in 2003 we have created over £1bn of shareholder value and we believe that this acquisition gives us further opportunity to continue our track record of creating significant value for our shareholders."
Due to the size of the acquisition, it needs the approval of Melrose shareholders, who will also be asked to vote on the rights issue at the general meeting on July 16th.
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