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Rosebank Industries, the listed vehicle set up by the founders of former turnaround specialist Melrose, will raise about £1.14bn to finance its first acquisition, a US-based manufacturer of electrical distribution systems.
Rosebank, which was set up by Simon Peckham and his Melrose colleagues last year, said on Friday it would buy Electrical Components International for an enterprise value of less than $1.9bn. The deal will be funded through a combination of debt and a fully underwritten institutional capital raise at £3 a share.
The update comes after Rosebank said this week that it had “re-engaged” with ECI’s owner, private equity group Cerberus Capital Management, about a potential deal, having first flagged talks in February.
The former Melrose executives are hoping to repeat the success of previous industrial turnarounds that generated significant returns for themselves and their backers by following a “buy, improve, sell” formula. Peckham, Rosebank’s chief executive, said the deal was the “first step on the journey”.
“We are very confident that we can help ECI to fully realise its potential for the benefit of its employees, customers and our shareholders,” he added.
Peckham and fellow Melrose co-founder and executive vice-chair Christopher Miller stepped down in 2023 before establishing Rosebank, which is backed by international investors including BlackRock, Norges and GIC, and listed on London’s junior stock market.
ECI, which had revenues of $1.3bn last year, primarily produces wire harnesses and controls, often for large blue-chip industrial customers.
Rosebank said it planned to double shareholders’ investment in a “three-to-five-year” time period through a series of “performance improvement measures”.
It hopes to take ECI’s adjusted operating margin from about 13 per cent to at least 18 per cent, and its adjusted earnings margin to at least 20 per cent.
It will continue ECI’s acquisition strategy of buying “smaller, complementary, high-margin businesses . . . funded through ongoing cash flows”. The deal will be put to shareholders at a meeting on July 1.
Melrose was listed on Aim in 2003, with the goal of turning around underperforming industrial businesses. It raised £13mn when it went public and went on to raise more than £10bn in equity and £17bn in debt to fund deals.
Melrose is now focused on the GKN aerospace business it acquired as part of its controversial £8bn takeover of the British engineer in 2018, and spun off its automotive activities under the name Dowlais in 2023. The car parts group agreed to be bought by American Axle & Manufacturing in a cash-and-shares deal earlier this year.
