Melrose readies £600m return after selling Crosby and Acco to KKR

The long-mooted sale, for a price at the top of expectations, is the latest demonstration of the FTSE-100 company’s “buy-improve-sell” strategy, built on snapping up undervalued businesses, investing in them and selling them on.

Both Crosby, which makes rigging and lifting equipment for use in the oil & gas and construction industries, and the smaller materials handling outfit Acco were acquired as part of Melrose’s £1bn purchase of FKI in 2008.

Geoff Martin, chief financial officer, said they were among 14 businesses bought as part of that deal, with Crosby one of the three biggest.

“We’ve increased our equity investment in Crosby by three times,” he said, adding: “It’s a good price. We had a good auction.”

He said Melrose invested around £30m in Crosby under its ownership, a rate of 1.5 times depreciation. Crosby had operating profits last year of $94.1m before exceptionals on $406m sales.

Melrose said it intended to “use the proceeds to pay down existing borrowings and to finance a return of capital in due course”, with analysts at RBC saying “we expect 45p-50p a share to be paid in 2014” – around £600m at the top end.

Mr Martin said Melrose was also “now back in the market for another acquisition” following last year’s purchase of Germany's Elster for £1.8bn, including debts.

That came after Melrose was outbid for Charter, the UK engineer sold to Colfax Corp of the US for £1.5bn.

The latest disposal comes 10 years to the month since Melrose listed as a £12m cash shell. On shares up 5.1 to 295.2 on Thursday, it is now worth £3.74bn – representing value creation of more than £2.5bn after accounting for cash raised.

Pete Stavros, head of KKR’s Industrials investing team, said Crosby and Acco had “distinguished histories of providing distributors and end customers with the highest quality products”.