Honeywell to buy Melrose's utility metering business for $5.1 billion

Tue Jul 28, 2015 12:52pm EDT
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By Esha Vaish and Lewis Krauskopf

(Reuters) - Honeywell International Inc (HON.N: Quote) has made its largest purchase in more than a decade, agreeing to buy the utility consumption metering business of Britain's Melrose Industries Plc (MRON.L: Quote) for about $5.1 billion.

The move, announced on Tuesday, is the first major deal for Honeywell, the U.S. diversified industrial manufacturer, since it laid out a five-year plan in March 2014 to target at least $10 billion in acquisitions. Investors have been eager to see how industrial companies use their capital as many of their markets struggle for growth.

The acquisition will give Honeywell access to Elster Group's metering technology and customers in the highly regulated heating, controls and metering industries, including smart meters and data analytics.

"It’s a very good strategic deal," Sterne Agee CRT analyst Peter Arment said. "You’ve seen growth of smart-metering technologies for the last ten years and I think there’s a long way to go."

Honeywell shares rose nearly 2 percent at $103.61 in mid-day trading, while Melrose was up nearly 10 percent.

The acquisition is Honeywell's largest since its merger with Allied Signal in 1999 and the biggest under David Cote, who became chief executive officer in 2002.

But the company, whose products range from aircraft systems to climate control, is still on the prowl. Asked on a conference call with analysts if the company was done striking deals this year, Chief Financial Officer Tom Szlosek said: "I don't think we're done ... We're going to keep going."

In fact, the Elster deal provides a new platform for acquisition targets, Honeywell executives said.   Continued...

A view of the corporate sign outside the Honeywell International Automation and Control Solutions manufacturing plant in Golden Valley, Minnesota, January 28, 2010. . REUTERS/ Eric Miller