(Reuters) - Honeywell International Inc said it would buy the utility consumption meter business of Britain's Melrose Industries Plc for 3.3 billion pounds ($5.14 billion) to boost its presence in high-growth regions.
Melrose shares jumped 16 percent in early trading on Tuesday, making it the top percentage gainer on the FTSE-250 midcap index <.FTMC>.
The all-cash deal for Melrose's Elster division will have a minor dilutive impact on its 2016 earnings per share, HONEYWELL (HON.NY) a maker of aircraft parts and climate control systems, said in a statement.
Melrose, an engineering turnaround specialist that follows a buy-improve-sell strategy akin to private equity firms, said separately that it would return 2 billion pounds to shareholders after the sale.
"Elster's gas business offers products in high demand among natural gas customers and brings a strong, global distribution network and numerous cross-selling opportunities for existing Honeywell technologies," Honeywell said.
Elster, which also makes flow computers and regulators for the gas industry, is estimated to post sales of $1.8 billion in 2015. It employs about 6,800 people across the United States, Germany, the UK and Slovakia.
"Elster also creates a new platform for acquisition targets for Honeywell," Honeywell Chief Executive Dave Cote said.
The deal value was set at about 12.6 times Elster's estimated 2015 consensus core earnings, Honeywell said.
(Reporting by Esha Vaish in Bengaluru; Editing by Gopakumar Warrier)
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