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Invensys raises $1bn from sales of Eurotherm and Rexnord

01 October, 2002

Invensys raises $1bn from sales of Eurotherm and Rexnord

Invensys has sold its Eurotherm Drives and Rexnord power transmission businesses, raising more than $1bn to help cut its debt. Eurotherm (officially, Invensys Drives Systems) has been sold to a management team for $145m in cash, while Rexnord has been bought for $880m by a US-based equity firm, the Carlyle Group. These sales leave the Fasco Motors business as the only remaining "non-core asset" in Invensys` current sell-off programme, which has already exceeded chief executive Rick Haythornthwaite`s target of generating £1.5m by March 2003.

Eurotherm is being bought by NewCo (Eastern), a company set up by the management team and a backer, Compass Partners European Equity. The new company will continue to trade under the Eurotherm Drives and Parvex names with Dan Barnhouse, previously president of Invensys` drives systems division, as chief executive and president. "We are very excited about this opportunity," he says. ""We intend to build and grow our business both organically and strategically."

"The management-led buyout has come at an ideal time in the company`s development," says Mark Hartley, Eurotherm`s head of UK sales and marketing. "All of our current major product lines have been introduced in the last two years and we are well underway with our long-term overseas expansion programme." Sales outside the UK now account for more than 85% of Eurotherm`s business.

The Eurotherm sale is subject to the usual regulatory approvals, but Invensys hopes that the deal will be completed by the end of November.

Eurotherm, whose headquarters are in Littlehampton, Sussex, employs more than 900 people worldwide. The company is the UK`s largest drives-maker with a product portfolio including AC and DC drives, servos and vector controllers.

In the year ending March 31, 2002, Eurotherm generated sales worth $115m and an operating profit of $20m. The net operating assets involved in the sale are worth around $40m, and goodwill totals $158m (of which $31m is already written off to reserves).

Rexnord, which produces power transmission components including bearings, chains, couplings, drives and brakes, is being sold for a gross consideration of $913m, less $33m for working capital, producing net proceeds of $880m. The business, which has more than 5,000 employees at more than 30 manufacturing plants worldwide, generated revenues of $724m and an operating profit of $104m, in the year to March, 2002.

The net assets that form part of the Rexnord deal are worth around $410m and goodwill being written off to reserves amounts to some $860m. Invensys hopes that this deal will also be completed by the end of November.

Rexnord`s buyer, the Carlyle Group, has more than $13.5bn in capital committed to 20 private funds, and has invested in more than 150 deals. Former British prime minister John Major is chairman of its European operation.

With these sales, Invensys` disposal programme has generated almost £1.6bn, exceeding its £1.5bn target well ahead of schedule. "We are delighted at both the pace of disposals and the prices achieved," says Haythornthwaite. Negotiations are underway on the last remaining disposal, Fasco Motors.




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