Melrose cuts ties with Bridon in £365m deal

Melrose Industries has agreed to sell one of Britain’s oldest industrial companies to a Canadian pension fund for £365m, the latest step in its break up of former FTSE 250 engineering group FKI.

Ontario Teacher’s Pension Plan, which last year bought Jammy Dodger maker Burton’s Biscuits, has agreed a deal to buy wire rope maker Bridon, which was founded in 1924 and can trace its roots back to a rope works in Doncaster in 1789.

^{The Canadian pension fund also owns Jammy Dodger biscuit maker Burtons}

Bridon started as a traditional rope manufacturer but now makes specialist cables, ties and wires for the mining, construction and energy sectors. The business was floated on the London stock market in 1978 and then bought by engineering group FKI for £130m in 1997.

Melrose Industries, which operates a private equity business strategy of buying undervalued engineering, industrial and manufacturing companies, improving them and then selling them on within five years, inherited Bridon when it bought FTSE 250 FKI in 2008 for £900m.

The turnaround specialist last year sold five businessesbroken out of its FKI acquistion. Truth, Marelli, Crosby, Acco and Harris were sold for £950m - more than tripling the value of the acquisition since its five year ownership.

“Bridon is an excellent example of the Melrose “buy, improve, sell” model at work. It demonstrates our ability to create substantial value for shareholders by investing heavily in our businesses and improving operational performance”, Simon Peckham, chief executive of Melrose, said.

“Since the acquisition of FKI in 2008, we have successfully grown and developed the Bridon business into a premier supplier of critical high-performance ropes for energy, mining and industrial applications. We have every confidence that Bridon will continue its success under the ownership of OTPP.”

Melrose said that the sale proceeds will be used to reduce its debt and finance a potential future shareholder payday. The FTSE 100 company gave investors a £600m windfall earlier this year after selling Crosby, a maker of lifting systems and Italian electrical motor company Marelli Motori.

In 2011 Melrose lost a £1.5bn race to takeover British engineering group Charter International.

Rope maker Bridon has suffered slowing revenues and falling profits as it was hit by a slowdown in the mining industry.

Bridon recorded sales of £266.4m and headline earnings of £41.6m last year.

Melrose continues to own FKI’s turbogenerator business Brush and utility meter business Elster.

Melrose said that it will contribute £6.7m into the Bridon Group’s Pension scheme. Rothschild and Nomura advised Melrose on the deal.