Nortek (NTK) Agrees to be Acquired by Melrose Industries PLC for $86/Share

July 6, 2016 8:06 AM EDT
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Nortek, Inc. (NASDAQ: NTK) signed an agreement and plan of merger with Melrose Industries PLC, a UK listed public company and Nevada Corp., a newly created wholly owned subsidiary of Melrose, to be acquired by Melrose for $86.00 per share in cash -- an estimated total enterprise value of approximately $2.8 billion. The Purchase Price represents a premium of approximately 38% to Nortek's closing price on July 5, 2016, and a premium of approximately 80.4% to the volume weighted average price over the prior six month period.

Pursuant to the terms of the Merger Agreement, Nevada Corp. will conduct an all-cash tender offer for 100% of Nortek's common stock (the "Offer") and, subject to the successful completion of the Offer, Nevada Corp. will merge with and into Nortek (the "Merger" and together with the Offer, the "Transactions") resulting in Nortek becoming a wholly owned subsidiary of Melrose. The Merger Agreement was unanimously approved by Nortek's and Melrose's Boards of Directors.

Under the terms of the Merger Agreement, Melrose will commence the Offer as promptly as practicable and in any event by no later than July 11, 2016. Any shares of Nortek common stock not tendered in the Offer will be acquired by Melrose in the Merger and the holders thereof will be entitled to receive the Purchase Price. The Nortek Board intends to recommend that Nortek stockholders tender their shares to Melrose in the Offer.

The closing of the Transactions is subject to Nortek stockholders validly tendering more than 50% of the outstanding shares of Nortek common stock prior to the expiration of the Offer. Certain stockholders of Nortek, affiliated with each of Ares Management LLC, Anchorage Advisor Management LLC and Gates Capital Management, Inc., owning approximately 68.7% of the outstanding shares of Nortek common stock in the aggregate, have entered into tender and support agreements with Melrose, pursuant to which such stockholders have agreed to tender their shares in the Offer, subject to certain limited termination rights. In addition, the Transactions will require the approval of Melrose's shareholders at a meeting that is expected to occur on July 25, 2016, as well as certain regulatory approvals and other customary closing conditions. Melrose's shareholders will be voting on three resolutions related to the Transactions, two of which require a simple majority of the votes cast to approve and one that requires 75% of the votes cast to approve. The Merger Agreement does not contain a financing condition. The Transactions are expected to close by August 31, 2016.

The Merger Agreement also provides for a window shop period through August 6, 2016, during which, subject to certain procedures outlined in the Merger Agreement, Nortek may enter into discussions and negotiations with third parties that submit an unsolicited proposal to acquire the Company. Should Nortek agree to accept a superior proposal prior to 11:59 p.m. (Eastern time) on August 6, 2016, Nortek would be required to pay to Melrose a termination fee equal to $50 million. For further information relating to the terms of the Merger Agreement and a complete copy of the Merger Agreement please see the Current Report on Form 8-K that will be filed by Nortek with the Securities and Exchange Commission today.

"We are very pleased to have reached the proposed agreement with Melrose Industries, which represents a significant premium for our shareholders," said Nortek's President and Chief Executive Officer Michael J. Clarke. "We believe this partnership with Melrose will enhance Nortek's ability to further leverage its industry-leading brands and market positions to continue driving profitable growth. We believe this transaction will be a positive for our employees and customers alike."

"We have watched and admired Nortek's progress and we are convinced we can steer this fine business to achieve its full potential," said Melrose's Chairman Christopher Miller. "We see a company full of hard-working, dedicated people who are really good at what they do. We can harness those strengths by meaningful long term investment and a vision based on our own experience in similar and relevant markets down the years. Melrose has been a highly successful custodian and builder of US businesses and we are confident that we can bring that expertise to build Nortek for the long term."

Barclays, Citi and RBC Capital Markets are acting as financial advisors and Weil, Gotshal & Manges LLP is acting as legal counsel to Nortek. Nomura International is acting as financial advisor and Simpson Thacher & Bartlett LLP is acting as legal counsel to Melrose.



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