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Melrose shares soar on Nortek takeover

The turnaround specialist has high hopes for a US manufacturer of air conditioning systems
July 6, 2016

Shares in Melrose Industries (MRO) leapt a third after the turnaround specialist revealed the latest target of its 'buy, improve, sell' strategy: Nortek (US:NTK), a manufacturer of air management, security, home automation and productivity solutions.

IC TIP: Await documents at 556p

Melrose will finance the $1.44bn (£1.1bn) reverse takeover via a £1.61bn rights issue and borrowing a further $780m. Management plans to unlock Nortek's value by investing in its manufacturing facilities, developing new products, boosting supply-chain efficiency and thrusting it into new markets. It also intends to slash Nortek's net debt from 5.1 times cash profits at the end of 2015 to about 2.5 times, lowering its interest payments and freeing up cash flow.

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