TIDMMRO
RNS Number : 8071V
Melrose Industries PLC
19 April 2021
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF EU REGULATION 596/2014, AS AMED (AS IT FORMS PART
OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT
2018).
FOR IMMEDIATE RELEASE
19 April 2021
MELROSE INDUSTRIES PLC
Proposed Disposal of Nortek Air Management for $3.625
billion
Melrose Industries PLC ("Melrose", the "Company" or the "Group")
today announces that it has entered into an agreement to sell its
Nortek Air Management business ("Air Management"), comprising the
Nortek Global HVAC ("GHVAC") and Air Quality & Home Solutions
("AQH") segments, to Chicago-based Madison Industries for
consideration of approximately GBP2.62 billion ($3.625 billion),
payable in cash on completion, subject to certain adjustments (the
"Disposal").
Key highlights of the Disposal:
-- Cash consideration of approximately GBP2.62 billion ($3.625
billion), subject to customary adjustments;
-- Implied sale multiple of 2.3 times 2020 revenue;
-- Implied sale multiple of 12.5 times 2020 Adjusted EBITDA;
-- Melrose intends to use part of the net proceeds to reduce
debt and contribute approximately GBP100 million to the GKN UK
defined benefit pension schemes, which means that the funding
deficit will have reduced from approximately GBP1 billion to
approximately GBP200 million under Melrose ownership; and
-- A portion of the net proceeds will be returned to Shareholders.
Completion of the Disposal is expected to occur in the second or
third quarter of 2021 and is conditional upon, amongst other
things, shareholder approval. Further details in respect of the
proposed return of capital will be announced by the Company within
a short period following Completion.
Justin Dowley, Chairman of Melrose, today said:
"The Disposal demonstrates the strength of the Melrose strategy.
We bought Nortek, an underperforming group, which we felt had
outstanding potential in 2016 for GBP2.2 billion ($2.8 billion). We
have seen approximately $1 billion of cash inflows from the Nortek
group during our ownership, effectively giving us an in-price of
$1.8 billion. The businesses being sold today for GBP2.62 billion
($3.625 billion) represent 73%, by revenue, of the Nortek group and
the returns are excellent. Our Ergotron and Nortek Control
businesses which also form part of the Nortek group remain under
our ownership and will be realised at an appropriate time."
Simon Peckham, Chief Executive of Melrose, today said:
"Our strategy of 'Buy, Improve, Sell' remains the same but
circumstances evolve. Our businesses are all responding to the
demands of climate change, driven by customers and consumers; Air
Management's StatePoint Technology(R) is a perfect example of this.
On our watch, our Air Management executive team has created a
business from scratch with exemplary environmental credentials
which will make a real difference to energy and water consumption
in its market. We can now hand that technology to a high quality
buyer with specialist aspirations and skills.
We are continuing to show that it is possible to make great
returns for shareholders, while looking after pensioners and
answering the environmental demands of the modern world."
Successful execution of Melrose's strategy for Air
Management
When acquiring Nortek, Inc. in 2016, the Melrose Board
immediately removed the top layer of cost-intensive central
management functions and empowered the operational and executive
teams to transform their businesses from top to bottom.
Thereafter, Melrose worked with the operational teams to improve
production processes, increase R&D, develop new products and
build stronger customer relationships. Having identified
substantial opportunities for incremental sales growth as well as
the opportunity to materially improve the business's efficiency and
profitability, Melrose then committed significant resources towards
improving Air Management.
Melrose has achieved the following in respect of the Air
Management business during its ownership:
-- In 2016 Melrose seed funded a new technology for the nascent
StatePoint business, with an initial $2 million of start-up funding
followed by approximately a further $75 million of investment;
-- The StatePoint Liquid Cooling technology for data centre
cooling, has since added over $300 million in fully contracted
future revenues with an impressive growth pipeline;
-- Almost doubled Air Management's Adjusted operating margin
from approximately 8.6% to 15.3% through the implementation of
operational best practices, and increased profits from GBP91
million to GBP188 million;
-- Implemented significant pricing controls, exited
non-profitable businesses and reinvigorated
Air Management's salesforce to improve efficiency and drive
growth; and
-- Streamlined its product portfolio, funded and accelerated new
product development initiatives and realigned the business with key
secular trends.
Principal terms and conditions of the Disposal
The consideration for the Disposal is based on an enterprise
value of approximately $3.625 billion and is payable in cash on
Completion, subject to limited customary adjustments.
Completion is conditional upon, amongst other things, customary
antitrust approvals and the approval of the Shareholders at a
General Meeting of Melrose Shareholders.
Melrose's strategy
The Disposal is in line with Melrose's established business
model to buy good manufacturing businesses, improve their
performance typically over a three to five-year investment horizon,
sell a more profitable and a better cash generating asset to a new
owner and return cash to Shareholders and other key
stakeholders.
Melrose's focus has always been to unlock the value of
underperforming but high quality manufacturing businesses through
investment and to generate superior returns for its Shareholders.
Since acquiring Nortek, Inc., Melrose has transformed Air
Management into a streamlined, efficient business with excellent
margins. Furthermore, in addition to representing a significant
return for Melrose investors, the sale of Air Management allows the
Company to focus on executing its improvement plans within its
retained divisions, comprising the Aerospace, Automotive, Powder
Metallurgy and Other Industrial segments.
A circular convening a General Meeting to consider and approve
the Disposal is expected to be published and posted to shareholders
shortly (the "Circular"). The Circular, when published, will be
made available on Melrose's website (www.melroseplc.net) and will
be submitted to the National Storage Mechanism and available for
inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
Baird and Citigroup Global Markets Inc. ("Citi") are acting as
joint financial advisers, and Simpson Thacher & Bartlett LLP is
acting as legal adviser, to Melrose in respect of the Disposal.
This announcement is released by Melrose and contains inside
information for the purposes of Article 7 of EU Regulation
596/2014, as amended (as it forms part of UK domestic law by virtue
of the European Union (Withdrawal) Act 2018). The person
responsible for arranging for the release of this announcement on
behalf of the Company is Jonathon Crawford, Company Secretary.
Capitalised terms used but not defined in this announcement have
the same meaning as defined in the Circular.
Enquiries:
Investor Relations: +44 (0) 7974 974690
ir@melroseplc.net
Montfort Communications - Financial +44 (0) 20 3514
PR: 0897
Nick Miles +44 (0) 7739 701634
+44 (0) 7921 881
Charlotte McMullen 800
miles@montfort.london / mcmullen@montfort.london
+44 (0) 20 7986
Citi - Joint Financial Adviser: 4000
Michael Lavelle
Andrew Truscott
Baird - Joint Financial Adviser:
+1 312 609 4983
Chris McMahon +44 (0) 20 7667
Nick Sealy 8370
Investec - Sponsor & Joint Corporate +44 (0) 20 7597
Broker: 5970
Carlton Nelson
Alex Wright
Information on Air Management and Melrose
Air Management is a world leader in providing critical air
management, thermal and HVAC solutions across broad commercial,
residential and datacentre markets. Air Management comprises two
operating segments: GHVAC and AQH, representing a range of world
class products spanning custom and commercial air solutions for
high-performance environments, residential and commercial HVAC and
fresh air ventilation systems for homes. For the financial year
ended 31 December 2020, Air Management generated GBP1,227 million
of Adjusted revenue and GBP188 million of Adjusted operating profit
(representing approximately 13% and 55% of Group Adjusted revenue
and Adjusted operating profit respectively) and, as at 31 December
2020, had gross assets of GBP1,436 million (representing
approximately 9% of Group gross assets).
Bruno Biasiotta (Chief Executive Officer of GHVAC), Michael
Marcely (Chief Financial Officer of GHVAC), Frank Carroll (Chief
Executive Officer of AQH) and Ryan Haines (Chief Financial Officer
of AQH) are expected to remain with Air Management going forward,
and will therefore exit Melrose as part of the Disposal.
Melrose buys good manufacturing businesses with strong
fundamentals whose performance can be improved. Melrose finances
its acquisitions using a low level of leverage, improves the
businesses by a mixture of investment and changed management focus,
sells them and returns the proceeds to shareholders. Melrose's
shares are traded on the London Stock Exchange. For more news and
information on Melrose, please visit www.melroseplc.net.
Disclaimers
Baird, which is authorised and regulated by the SEC in the
United States is acting as financial adviser for Melrose and for no
one else in connection with the matters described in this
announcement and will not be responsible to anyone other than
Melrose for providing the protections afforded to clients of Baird
nor for providing advice in connection with the Disposal, or any
other matters referred to in this announcement. Neither Baird nor
any of its affiliates, directors or employees owes or accepts any
duty, liability or responsibility whatsoever (whether direct or
indirect, consequential, whether in contract, in tort, in delict,
under statute or otherwise) to any person who is not a client of
Baird in connection with this announcement, any statement contained
herein, the Disposal or otherwise.
Citi, a broker-dealer registered with the U.S. Securities and
Exchange Commission, is acting as financial adviser for Melrose and
for no one else in connection with the matters described in this
announcement and will not be responsible to anyone other than
Melrose for providing advice in connection with the Disposal, or
any other matters referred to in this announcement. Neither Citi
nor any of its affiliates, directors or employees owes or accepts
any duty, liability or responsibility whatsoever (whether direct or
indirect, consequential, whether in contract, in tort, in delict,
under statute or otherwise) to any person who is not a client of
Citi in connection with this announcement, any statement contained
herein, the Disposal or otherwise.
Investec Bank plc which is authorised by the Prudential
Regulation Authority and regulated by the Financial Conduct
Authority and the Prudential Regulation Authority in the United
Kingdom, is acting exclusively for Melrose and for no one else in
connection with the subject matter of this announcement and will
not be responsible to anyone other than Melrose for providing the
protections afforded to its clients or for providing advice in
connection with the subject matter of this announcement.
This announcement contains certain "forward looking statements"
including with respect to certain of the Melrose group's plans and
its current goals and expectations relating to its future financial
condition, performance, results, strategy and objectives.
Statements containing the words "believes", "intends", "should",
"plans", "pursues", "seeks" and "anticipates" (or negatives
thereof), and variations thereof or words of similar meaning, are
forward looking. By their nature, all forward looking statements
involve assumptions, risk and uncertainty because they relate to
future events and circumstances which are beyond Melrose's control
including, among other things, the domestic and global economic and
business conditions, market-related risks such as fluctuations in
interest rates and exchange rates, and the performance of financial
markets generally; the policies and actions of regulatory
authorities, the impact of competition, inflation and deflation;
the timing, impact and other uncertainties of future acquisitions
or combinations within relevant industries and the impact of
changes in capital, solvency or accounting standards, and tax and
other legislation and any regulations in the jurisdictions in which
Melrose and its affiliates operate. As a result, Melrose's actual
future financial condition, performance and results may differ
materially from the plans, goals and expectations set forth in the
forward looking statements and no assurances can be given that the
forward looking statements in this announcement will be
realised.
Any forward looking statements made herein speak only as of the
date they are made. Except as required by the Financial Conduct
Authority, the London Stock Exchange or any other applicable law or
regulation, Melrose expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward looking statements contained in this announcement to
reflect any change in Melrose's expectations with regard thereto or
any change in events, conditions or circumstances on which any such
statement is based.
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END
DISIPMPTMTJBBPB
(END) Dow Jones Newswires
April 19, 2021 02:00 ET (06:00 GMT)
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