Melrose to sell off Bridon unit for £365m

Manufacturing conglomerate Melrose is to offload its industrial cable, ties and wire making division Bridon to a Canadian pension fund for £365m and said it would use the proceeds to pay down debt and finance a capital return.

Bridon, acquired by Melrose through the takeover of engineering group FKI in 2008, will be sold to the Ontario Teachers' Pension Plan (OTPP) on a debt- and cash-free basis.

Melrose's chief executive Simon Peckham said the deal is an "excellent example" of the company's 'buy, improve, sell' model.

"It demonstrates our ability to create substantial value for shareholders by investing heavily in our businesses and improving operational performance," he said.

As part of the transaction, Melrose will contribute £6.7m into Bridon's pension scheme, which will remain with the latter on disposal.

The disposal, subject to certain anti-trust approvals, is expected to complete before the end of 2014.

Analyst Michael Blogg at Investec had anticipated that the unit would be sold for £340m. Hence, if one assumes the group will maintain net debt/EBITDA at 2.5 times on a continuing basis then net debt in 2015 should come down by £100m. That implies a potential cash return of just over 20p per share, Blogg added.