Honeywell to acquire Elster from Melrose

Honeywell International has agreed to acquire the Elster division of Melrose Industries for US $5.1b ($7.0b).

Elster provides 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. In addition, the division manufactures flow computers and regulators for the gas industry.

Elster consensus sales for 2015 are estimated to be US $1.8b ($2.5b). The price translates to approximately 12.6 times Elster’s estimated 2015 consensus earnings before interest, taxes, depreciation, and amortization (EBITDA), and the acquisition is anticipated to occur in the first quarter of 2016.

“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 – and because Honeywell can run this company effectively and accelerate its growth through our complementary technologies, software knowledge, and presence in High Growth Regions,” said Honeywell Chairman and CEO Dave Cote said in a statement.

 “The Elster acquisition proves that we are staying true to our disciplined M&A approach and integration processes because it’s a model that has worked very well for us.”

Elster employs approximately 6,800 people with major locations in the United States, Germany, the United Kingdom, and Slovakia. The company maintains an impressive installed base with more than 200 million metering modules deployed over the course of the last 10 years alone.

The agreement is subject to customary closing conditions, including regulatory review and Melrose shareowner vote.