TheStreet's Jim Cramer commented on the Honeywell acquisition calling it a "Brilliant move by CEO Dave Cote to create another big leg that margins can expand from."
Melrose Industries is a global leader in gas heating, controls, metering and advanced technologies. Honeywell, an aircraft parts and climate control systems maker, will purchase Melrose's utility consumption meter business.
This is Honeywell's largest acquisition in over a decade, Reuters reports. The purchase will give the company access to Elster's niche technologies and customers in a highly regulated industry.
"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," Honeywell CEO Dave Cote said in a statement.
The all-cash deal is expected to close in the first quarter of fiscal 2016.
Insight from TheStreet Research Team:
Honeywell International is a core holding of Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Here is what Jim Cramer, Portfolio Manager, and Jack Mohr, Director of Research-AAP, had to say about the company's latest acquisition:
CEO Dave Cote has repeatedly assured investors that the company will be more aggressive with capital allocation via M&A as buybacks have taken a backseat. The purchase makes good on that promise and could add $0.30- $0.40 per share to EPS starting in 2017 (about one-third of the promised $1.00 per share of external, incremental EPS by 2018).
Elster should fit nicely into Honeywell's automation and control solutions segment, adding its installed base, which consists of more than 200 million metering modules (which have been deployed in last 10 years alone).
Overall, we applaud management's aggressiveness in acquiring the leader in a growing space of importance. Even more, the deal opens up the opportunity for more in the space to help bolster Honeywell's newly acquired capabilities.
-Jim Cramer and Jack Mohr "Honeywell's 'Smart' Deal for Meter Leader" Originally Published on July 28, 2015 on Action Alerts PLUS.
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