Almost exactly 5 years after acquiring Nortek Inc, Melrose Industries, a UK investment company, has agreed to sell Nortek Control, a leading solutions provider in the security, control, access, power/AV, health + wellness, and AI/analytics markets, for around $285 million (£0.2 billion). This is according to management statements in the company’s latest financial half year results report released on the 2nd September 2021.
The Melrose company philosophy is to “Buy, Improve, Sell” and the Group buys high quality underperforming manufacturing businesses and invests in making them stronger, better businesses with the aim of benefitting all stakeholders, and at the same time, delivering interesting returns for shareholders.
On 31 August 2016 Melrose completed the acquisition of Nortek Inc through a merger of one of its subsidiaries with and into Nortek, and the deal, according to the company’s financial report was for an enterprise value of £2.2 billion, funded by £1.6 billion of equity and £0.6 billion of debt.
At the time, Reuters and various analysts put this original move down to the emerging trend for European companies to invest in the United States because Britain’s decision to leave the EU was unsettling the markets closer to home.
Melrose subsequently began divesting parts of the original Nortek Inc acquisition in June this year, with the sale of the Nortek Air Management division, and once the Nortek Control sale has concluded, the Ergotron business will be the only retained part of that original Nortek Inc acquisition.
The Melrose Group completed the disposal of Nortek Air Management to Madison Industries in June 2021 for gross proceeds of £2.6 billion, and on 23 August 2021 the Group entered into an agreement to sell Nortek Control for £0.2 billion. The financial statement also confirms that the Nortek businesses had generated £700 million in cash since the original acquisition.
This means that with the £2.8 billion gross sale proceeds, together with the cash generated by the companies before their disposal, and the value of the retained Ergotron business, the shareholders are set to enjoy a doubling of their equity investment in the original Nortek acquisition.
The review from Geoffrey Martin, the Group Finance Director at Melrose confirms that contracts were exchanged for the disposal of Nortek on 23 August 2021. The report also states that the businesses are going to “good new homes in which their development can be continued” but the name of the buyer was not disclosed.
