British turnaround specialist Melrose to buy US ventilation products maker Nortek for $2.81 bn

British manufacturing buyout firm Melrose Industries Plc today struck a deal to buy US-based ventilation products maker Nortek Inc in a deal worth $2.81 billion.

Under the terms of the deal, Melrose is offering to pay 86 per Nortek share in cash, a premium of about 38 per cent to Nortek's Tuesday closing price.

Melrose expects to fund the proposed acquisition through new debt of about $780 million and a full written rights issue of new shares to raise about £1.6 billion.

The merger agreement provides Nortek to shop itself until 6 August 2016, and should Nortek agree to accept a superior proposal, it would pay Melrose a termination fee of $50 million.

Nortek's board said that it intends to recommend the offer, and added that shareholders holding about 68.7 per cent stake have backed the deal.

Nortek, which emerged from bankruptcy protection in 2010, is a leading diversified manufacturer of innovative air management, security, home automation and ergonomic and productivity solutions.

It was founded in 1967 and based in Providence, Rhode Island.

The company's products include 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.

London-listed Melrose acquires and turns around underperforming engineering companies before selling them for a profit.

Its strategy is to acquire good manufacturing businesses with strong fundamentals whose performance can be improved. Melrose finances its acquisitions using a low level of leverage, improves the businesses by a mixture of investment and changed management focus and sells them for a profit.

The principal business operated by Melrose is Brush. Brush Turbogenerators is the world's largest independent manufacturer of electricity-generating equipment for the power generation, industrial, oil & gas and offshore sectors.