NEW YORK (The Deal) -- London-listed industrial investor Melrose Industries said Tuesday it is selling its utilities metering business to Honeywell (HON) - Get Report for £3.3 billion ($5.1 billion). The deal for Elster Group marks Honeywell's return to big-ticket deal making 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.
Honeywell has done only one $1 billion-plus acquisition since 2009, of protective clothing maker Sperian Protection 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.
In October Melrose agreed to sell heavy-duty rope and cable maker Bridon Ltd.to Ontario Teachers' Pension Plan for £365 million. A month earlier the gas division of Elster agreed to buy Rockford, Ill.-based Eclipse in a deal worth $158 million.
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