Melrose buying HVAC maker Nortek for $2.8 billion

Written on: July 6, 2016 by ICM


British turnaround firm Melrose Industries is buying Nortek Inc., whose furnace and air-conditioner unit is based in O’Fallon, Mo., in a deal worth $2.81 billion.
Nortek’s shares rose nearly 40 percent at $87.26 in morning trading on Wednesday, the highest in more than 10 months. Pending shareholder and regulatory approval, the sale is set to close by August 31.
Nortek is based in Providence, R.I., and one of its largest business units, Nortek Global HVAC, formerly known as Nordyne, is based in O’Fallon, Mo.
Nordyne was formed in 1987 through the merger of Intertherm Inc. of St. Louis and Miller Heating & Air Conditioning of Holland, Mich. Nortek acquired Intertherm in 1985.
Nordyne grew to become a sizable local employer, with 1,800 employees in Missouri in 2003. It began paring its local footprint by shuttering a furnace plant in 2003 in south St. Louis on property that now houses the Loughborough Commons retail center.
Nortek Global HVAC announced plans in 2013 to close all its plants in Missouri and move manufacturing to Saltillo, Mexico. More than 700 jobs were lost when Nortek closed plants in Boonville and Poplar Bluff in 2014.
Nortek Global HVAC listed 256 local employees on a recent update to its business license, according to O’Fallon’s interim economic development director Patty Brown.
In its most recent quarter, Nortek reported that its residential and commercial HVAC unit grew net sales 10 percent to $147 million, driven by increased volume in its residential business. Nortek, whose products are in 80 percent of U.S. homes, said earlier it expected 2016 net sales to grow.
“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,” Nortek president and CEO Michael Clarke said in a statement.
The deal announced on Wednesday gives Melrose access to Nortek’s large North American ventilation and home security business against a backdrop of “key U.S. economic indicators pointing to continued momentum in construction” according to the British firm.
Although U.S. construction spending recorded its biggest decline in more than five years in April, it contrasted with an upwardly revised jump in March and fairly strong data on industrial production and housing which have bolstered views the economy was regaining speed.
Melrose’s cash offer of $86 per share represents a premium of about 38 percent to Nortek’s Tuesday close and implies an equity value of $1.436 billion.
The sale will reduce the debt burden on Nortek, which had filed for bankruptcy in 2009 to eliminate $1.3 billion in debt and emerged from Chapter 11 protection in 2010.
Two analysts said another player may counter bid for Nortek. The Wall Street Journal reported last year that United Technologies Corp. was briefly interested.
Reuters contributed to this story. 
Article courtesy of St. Louis Post-Dispatch