Thu, 28 Aug 2014 | DIVISION SALE
UK investment firm Melrose Industries Plc is set to begin a sale process for Elster, the German utility meter maker that it acquired for £1.8 billion in 2012.
Melrose Industries, a specialist in turning around engineering businesses, follows a ‘buy, improve and sell’ model and takes three to five years to improve a business’ performance before selling at a profit, handing a large wedge of the proceeds to shareholders.
Under Melrose’s ownership Elster has seen its profits jump by almost 50 per cent. The private equity firm still could add more value to the 100-year-old water metre business, Simon Peckham, its chief executive, told the Financial Times, but could be in for a disposal as early as 2015.
Melrose has sold five similar businesses over the past two years for £950 million, achieving a return of about £600 million to shareholders.
The firm is on the hunt for its next target, and plans to spend £1 billion to £3 billion on a purchase. An increase in asset prices over the past year and a half has made the search more difficult, however, Mr Peckham said.
He added: “We are seeing opportunities out there but we’re not seeing them at the right price.”
A strong pound has led to falling profits for Melrose, and has also been affected by changes in the US dollar and the euro.
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