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Buy-out firm Melrose plc (LSE:MRO) has commenced dealing of newly issued shares today as part of the company’s plan to raise £1.2 billion to finance the proposed acquisition of Germany-based engineering company Elster Group SE.
The more than 845 million new shares bear a fully underwritten rights issue, regarded by Melrose as the “most appropriate method” to fund the takeover, in a statement released on 29th June 2012.
The rights issue announced in June offers two new Melrose shares for every one existing share in the company, at a price of 142 pence a share, with the record date set last 12th July.
The offer gave a discount of about 61.5% to Melrose’s share price of 369 pence on 28th June 2012 and about 64.67% discount from yesterday’s close of 401.9 pence.
Shares of FTSE 250 firm traded at 226.5 pence at 2:00 PM GMT dealing in ex-rights, above the 218 pence theoretical ex-rights price previously estimated.
The Elster Group Acquisition
Yesterday, the company said “all resolutions regarding proposed recommended acquisition of Elster Group SE and the associated Rights Issue were passed” at a general meeting that sought shareholder approval for the acquisition and the raising of new equity.
The deal, valued around £1.5 billion, has already secured 62.17% of the issued capital stock of Elster, coming from its biggest shareholder Rembrant Holdings, S.A.
Melrose, whose strategy is to acquire underperforming manufacturing businesses and turn them into attractive investment, said before, “there are further business development opportunities for Elster as well as an opportunity to improve efficiency, all of which are expected to improve Elster’s financial performance”.
Elster Group is one of the world’s largest providers of metering equipment used in gas, electricity, and water, with revenue of US$1.869 billion in 2011.
“Melrose plans to support Elster’s management team to grow the Elster business to its fullest potential, in accordance with a business plan to be agreed with the Elster management team,” Melrose said back in June.
The company has also set aside £321 million from the proceeds of loans, in addition to the equity financing it raised to fund the takeover.
The tender offer to Elster is expected to be effective in August 2012.
Company Spotlight
Melrose plc is a UK-based investment company focussed on acquiring underperforming businesses in the manufacturing sector, developing them to become profitable companies, and disposing them to generate shareholder value.
The company first joined the Alternative Investment Market in 2003 and later moved to the main market of the London Stock Exchange in 2005. The company is part of the FTSE 250 Index.
