- Company to buy back £500 million worth of shares
- Follows sale of last business associated with 2016 Nortek acquisition
- Briefing investors on GKN Aerospace today
Industrial outfit Melrose (MRO) is clearly in no mood to hang around. Just two days after announcing the £520 million sale of ergonomic products maker Ergotron, the company has unveiled a £500 million share buyback.
Investors have reacted extremely positively to the news, marking the shares 8.2% higher to 153.7p. Ergotron is the last of several businesses picked up in the acquisition of the wider Nortek group in 2016.
Melrose chief executive Simon Peckham said: ‘Having agreed the sale of Ergotron, we are now in a position to again distribute capital to our shareholders and have chosen the quickest way to start to achieve that goal.
‘We will continue to keep under review the appropriate capital structure of Melrose as we position for continuing success.’
It leaves Melrose with the assets it captured through the controversial acquisition of aerospace and automotive engineer GKN in 2018.
Speculation may now mount over the company’s next moves in regard to these assets, with the company briefing investors at a special event today about the GKN Aerospace business.
CONSISTENT MODEL
Since its inception in the early noughties Melrose’s has consistently followed a fairly straightforward 'buy, improve, sell' model.
It buys manufacturing businesses which are suffering from a lack of investment, then looks to drive operational improvements and boost cash generation.
Although its approach has been compared to private equity, Melrose points to differences as it typically invests fresh capital in the businesses it acquires rather than simply stripping out costs.
Having achieved the targeted improvements, management will choose what it feels is the appropriate time to sell. Often this comes three to five years post acquisition but there is a degree of flexibility.
According to figures on its website (which won’t encompass these latest transactions) Melrose has delivered a cash return of £5.5 billion since its establishment and achieved an average return on equity of 2.5 times across all the businesses sold.
