Nortek Being Acquired by Investment Firm Melrose Industries, to be Packaged for Resale
UK-based Melrose Industries, Plc, likes to “buy, improve, sell” manufacturing companies within two to three years. Nortek makes residential products including ventilation, security, home automation, audio/video under brands such as Broan, Nutone, Core Brands and 2Gig.
Nortek, Inc. Enters Into Definitive Merger Agreement With Melrose Industries PLC
Melrose Industries PLC to Acquire Nortek, Inc. for $86 per Share in Cash
PROVIDENCE, RI -- (Marketwired) -- 07/06/16 -- Nortek, Inc. (NASDAQ: NTK) ("Nortek" or the "Company"), a global diversified industrial company with leading brands and innovative air management and technology-driven solutions for residential and commercial applications, today announced that it has signed an agreement and plan of merger (the "Merger Agreement") with Melrose Industries PLC ("Melrose"), a UK listed public company and Nevada Corp., a newly created wholly owned subsidiary of Melrose, to be acquired by Melrose for $86.00 per share in cash (the "Purchase Price") -- an estimated total enterprise value of approximately $2.8 billion. The Purchase Price represents a premium of approximately 38% to Nortek's closing price on July 5, 2016, and a premium of approximately 80.4% to the volume weighted average price over the prior six month period.
Pursuant to the terms of the Merger Agreement, Nevada Corp. will conduct an all-cash tender offer for 100% of Nortek's common stock (the "Offer") and, subject to the successful completion of the Offer, Nevada Corp. will merge with and into Nortek (the "Merger" and together with the Offer, the "Transactions") resulting in Nortek becoming a wholly owned subsidiary of Melrose. The Merger Agreement was unanimously approved by Nortek's and Melrose's Boards of Directors.
Under the terms of the Merger Agreement, Melrose will commence the Offer as promptly as practicable and in any event by no later than July 11, 2016. Any shares of Nortek common stock not tendered in the Offer will be acquired by Melrose in the Merger and the holders thereof will be entitled to receive the Purchase Price. The Nortek Board intends to recommend that Nortek stockholders tender their shares to Melrose in the Offer.
The closing of the Transactions is subject to Nortek stockholders validly tendering more than 50% of the outstanding shares of Nortek common stock prior to the expiration of the Offer. Certain stockholders of Nortek, affiliated with each of Ares Management LLC, Anchorage Advisor Management LLC and Gates Capital Management, Inc., owning approximately 68.7% of the outstanding shares of Nortek common stock in the aggregate, have entered into tender and support agreements with Melrose, pursuant to which such stockholders have agreed to tender their shares in the Offer, subject to certain limited termination rights. In addition, the Transactions will require the approval of Melrose's shareholders at a meeting that is expected to occur on July 25, 2016, as well as certain regulatory approvals and other customary closing conditions. Melrose's shareholders will be voting on three resolutions related to the Transactions, two of which require a simple majority of the votes cast to approve and one that requires 75% of the votes cast to approve. The Merger Agreement does not contain a financing condition. The Transactions are expected to close by August 31, 2016.
The Merger Agreement also provides for a window shop period through August 6, 2016, during which, subject to certain procedures outlined in the Merger Agreement, Nortek may enter into discussions and negotiations with third parties that submit an unsolicited proposal to acquire the Company. Should Nortek agree to accept a superior proposal prior to 11:59 p.m. (Eastern time) on August 6, 2016, Nortek would be required to pay to Melrose a termination fee equal to $50 million. For further information relating to the terms of the Merger Agreement and a complete copy of the Merger Agreement please see the Current Report on Form 8-K that will be filed by Nortek with the Securities and Exchange Commission today.
"We are very pleased to have reached the proposed agreement with Melrose Industries, which represents a significant premium for our shareholders," said Nortek's President and Chief Executive Officer Michael J. Clarke. "We believe this partnership with Melrose will enhance Nortek's ability to further leverage its industry-leading brands and market positions to continue driving profitable growth. We believe this transaction will be a positive for our employees and customers alike."
"We have watched and admired Nortek's progress and we are convinced we can steer this fine business to achieve its full potential," said Melrose's Chairman Christopher Miller. "We see a company full of hard-working, dedicated people who are really good at what they do. We can harness those strengths by meaningful long term investment and a vision based on our own experience in similar and relevant markets down the years. Melrose has been a highly successful custodian and builder of US businesses and we are confident that we can bring that expertise to build Nortek for the long term."
Barclays, Citi and RBC Capital Markets are acting as financial advisors and Weil, Gotshal & Manges LLP is acting as legal counsel to Nortek. Nomura International is acting as financial advisor and Simpson Thacher & Bartlett LLP is acting as legal counsel to Melrose.
About Nortek Nortek is a global, diversified industrial company whose many market-leading brands deliver broad capabilities and a wide array of innovative, technology-driven products and solutions for lifestyle improvement at home and at work. The Company's broad array of offerings includes ventilation products such as range hoods and bathroom fans, security and audio/video solutions, heating and cooling products, air management systems, and ergonomic and productivity solutions.
As used herein, the term "Nortek" refers to Nortek, Inc., together with its subsidiaries, unless the context indicates otherwise. This term is used for convenience only and is not intended as a precise description of any of the separate corporations, each of which manages its own affairs.
About Melrose Industries PLC Melrose Industries is a UK listed public company. The Company's focus is to acquire high quality industrial manufacturing businesses with strong fundamentals whose performance can benefit from a change in circumstances. The strategy is based on supporting and incentivizing management teams to transform and grow their businesses without the burden of quarterly reporting or restrictive financing covenants, achieving above market profit growth and increased operating margins. Through a combination of overhead reduction and gross margin expansion, achieved through targeted investment in portfolio businesses, Melrose has been able to increase headline operating margins by five to nine percentage points in all historical investments. Melrose employs low levels of leverage but invests heavily in its businesses. On average, Melrose invests a further third of the original purchase price in its businesses post-acquisition.
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Julie Jacobson is founding editor of CE Pro, the leading media brand for the home-technology channel. She has covered the smart-home industry since 1994, long before there was much of an Internet, let alone an Internet of things. Currently she studies, speaks, writes and rabble-rouses in the areas of home automation, security, networked A/V, wellness-related technology, biophilic design, and the business of home technology. Julie majored in Economics at the University of Michigan, spent a year abroad at Cambridge University, and earned an MBA from the University of Texas at Austin. She is a recipient of the annual CTA TechHome Leadership Award, and a CEDIA Fellows honoree. A washed-up Ultimate Frisbee player, Julie currently resides in San Antonio, Texas and sometimes St. Paul, Minn. Follow on Twitter: @juliejacobson Email Julie at firstname.lastname@example.org
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