Melrose Industries swoops for $2.2bn Nortek's US residential access

Melrose Industries has agreed to acquire US air conditioning and security technology group Nortek for $1.44bn in cash, funded by a proposed £1.61bn issue of new shares.

Due to the size of the deal, where the proposed offer price of $86 per share values Nortek's shares at $1.436bn (£1.1bn) and the entire enterprise including debt at $2.81bn million (£2.15bn), it will be classed as a reverse takeover and require the approval of recent FTSE 250 emigrée Melrose's shareholders.

As well as the fundraising, Melrose, which said it had received "very supportive" noises from number of its institutional shareholders about the deal, proposed to fund the balance of the debt repayment through new debt of approximately $780m.

Melrose - whose strategic maxim is "buy, improve, sell" - said the addition of the Rhode Island outfit would be "significantly accretive" to headline earnings per share in the first full financial year of ownership and thereafter.

Nortek, which reported revenue of $2.53bn and headline operating profit of $220.1m in calendar 2015, is a manufacturing business that accrued over 90% of that turnover from within North America and offers Melrose product penetration into 80% of US households.

"It serves attractive end markets at good points in their cycle, with strong brands and market positions," said Melrose's chief executive Simon Peckham. "Nonetheless there remains solid potential for further improvement under Melrose's guidance."

He said Melrose, by applying its "industrial experience and investment expertise" and "liberating" Nortek from its current capital structure will "transform" its prospects.