Melrose Industries could join Philips lighting auction - report

Melrose Industries has begun running the rule over the £4bn lighting arm of Dutch electronics giant Philips, which would represent the group's largest purchase to date, Sky News reported, citing an unnamed source.

The FTSE 250 company, which operates an acquisition strategy it calls ‘buy, improve, sell’, is mulling whether to join an auction of the lighting business.

Philips lighting division has already attracted interest from some of the world's largest private equity groups.

The move would see a diversion from Melrose's normal acquisitive path, as it has largely avoided auctions.

The rfeport said the odds on Melrose succeeding in this bid were lower than usual as the competing private equity firms would more happily use debt to finance the transaction.

Just before New Year's Eve, Melrose announced that it had completed the £3.3bn disposal of its Elster business and would soon proceed with the proposed return of around £2.4bn in cash to shareholders, equivalent to 240p per ordinary share.

The company said the balance of the net proceeds has been used largely to pay down existing borrowings, with chairman Christopher Miller saying: “We are optimistic that a suitable acquisition will be identified to bring additional shareholder value and we look forward to inviting investors to participate in this next project in due course.”