London-listed industrial investor Melrose Industries plc on July 28, made its largest disposal to date through a £3.3 billion ($5.1 billion) deal with Honeywell International Inc. (HON) for its Elster Group SE utilities metering business that marks a return to big-ticket dealmaking by the U.S. buyer after a five-year hiatus. The agreement comes just under three years after Melrose spent £1.8 billion buying Elster from CVC Capital Partners and defies expectations that Melrose would first sell Elster’s water metering unit only. The agreement includes Elster Gas and Elster Electricity as well as the water business. Morris Township, N.J.-based Honeywell has done only one $1 billion-plus acquisition since 2009 – that of protective clothing maker Sperian Protectinon SA in 2010 for $1.4 billion – and had been expected to look to M&A to spur growth. However, expectations had focused on a large aerospace components deal. Honeywell will pay Melrose cash on completion equivalent to 3.1 times Elster’s 2014 revenue and 14.3 times Ebitda, Melrose said. The agreement also includes the assumption by Honeywell of two Melrose defined pension schemes and Elster pension obligations. Melrose said the Elster investment generated a return of 2.3 times and a 33% internal rate of return. It plays to hand back more than £2 billion to shareholders.
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