Honeywell paying 5.1B for heating and utility technology company

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Honeywell is paying about $5.1 billion in cash for a British company’s thermal gas solutions division, it announced Tuesday.The Morris Township-based conglomerate is buying the Elster Division of Melrose Industries plc, which has estimated 2015 sales of $1.8 billion. Elster, which makes products for commercial, industrial and residential heating systems, as well as gas, water and electricity meters and other utility products, employs about 6,800 people worldwide.

“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 Chairman and Chief Executive Officer Dave Cote said in a prepared statement.

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Birmingham, United Kingdom-based Melrose acquired Elster in 2012 for 1.8 billion pounds; Tuesday’s sale price is 3.3 billion pounds. When all factors are considered, the deal generates 2.3 times the equity investment for the company, Melrose said.

“The disposal of Elster represents an excellent outcome for Melrose shareholders and another milestone in our track record,” Melrose Chairman Christopher Miller said in a statement. “Through investing heavily and improving operational performance, we have created substantial value for shareholders, more than doubling their money in three years.”

The deal, which is subject to customary closing conditions and regulatory approvals, is expected to close in the first quarter of 2016.

“Elster has outstanding technologies, brands, energy efficiency know-how and global presence, all of which we are very well-positioned to build on,” Cote said. “Elster also creates a new platform for acquisition targets for Honeywell that will be additive to the business’s growth and global presence. We will see immediate benefits to Honeywell’s portfolio, accelerating into 2016 and 2017.

“This is a great acquisition for Honeywell and our shareowners.”

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