Nortek Inc. recently agreed to a sweetened deal from New York-based buyout firm Kelso & Co., which will pay $1.6 billion in cash and assumption of debt for the Providence-based manufacturer of commercial and residential building products.
Kelso’s acquisition, expected to close during the third quarter, will be in partnership with several members of Nortek management, including Nortek Chairman and Chief Executive Officer Richard L. Bready. Nortek, which makes windows and doors, ventilation systems, heating and cooling units and other products, said it will continue to operate under its current name and operational structure.
The acquisition includes about $505 million in cash and assumption of more than $1 billion in Nortek debt. The deal will pay Nortek shareholders $46 per share in cash – up from the $40-a-share bid Kelso offered in April. Nortek’s board of directors approved the transaction after a special, independent committee, advised by Morgan Stanley Co., determined that the $46-a-share bid was "fair, from a financial point of view."
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Nathan Hudson, an analyst who covers Nortek for Banc of America Securities in New York, said the acquisition should put Nortek in a position to grow through acquisitions in the building-products market.
"With the financial backing from Kelso, it allows the company to be more aggressive in terms of acquisitions," Hudson said. "I think they’ll have an open mind and be pretty opportunistic."
Nortek might obtain a revolving line of credit to help fund prospective acquisitions, according to sources cited in a June 22 story in The Daily Deal, a New York-based publication focused on mergers and acquisitions. At its annual meeting in May, Bready said the company would look to broaden its product offerings and expand distribution both domestically and internationally, seeking acquisitions where appropriate.
The Daily Deal story also said that Kelso’s original bid in April sparked a small bidding war among other New York City acquisition firms. Buyout firms The Cypress Group LLC and Investcorp each made non-binding proposals of more than $40 a share, according to the article.
Nortek had earnings of $34.5 million in 2001 on sales of nearly $1.9 billion. The company has nearly 10,000 employees worldwide, though fewer than 50 of those are based in Rhode Island, at Nortek’s corporate headquarters at 50 Kennedy Plaza.
