KKR & Co., the private-equity firm led by Henry Kravis and George Roberts, agreed to purchase two manufacturing businesses from London-based Melrose Industries Plc for about $1 billion.
KKR will acquire Tulsa, Oklahoma-based Crosby Group and York, Pennsylvania-based Acco Material Handling Solutions, the New York-based buyout firm said in a statement yesterday. The companies make hooks, hoists, slings and other equipment used in heavy lifting.
Melrose sold the businesses together as a package, with a majority of the earnings coming from Crosby. KKR has followed the industrial-lifting industry closely since last year after acquiring Capital Safety Ltd., which makes lanyards and harnesses that protect workers from falls, said Pete Stavros, the head of KKR’s industrials investing team. KKR is bullish on construction and mining activity, which boost demand for heavy-lifting equipment, according to Stavros.
“We like the end-market exposure,” Stavros said in a telephone interview today, citing growth in oil and gas, mining and infrastructure.
Melrose rose 1.8 percent to 295.20 pence at the close of London trading, valuing the company at 3.74 billion pounds ($6 billion).
In a separate deal, KKR agreed to purchase a stake in Weststar Aviation Services Sdn. for 642 million ringgit ($200 million), marking the firm’s first investment in Malaysia.
The transaction will give KKR a “substantial minority” stake in Weststar, which provides offshore helicopter transportation services to oil and gas companies, according to a joint statement yesterday by the firms.
KKR in July completed a $3.85 billion buyout of Gardner Denver Inc., which makes industrial equipment such as compressors and pumps.
Melrose buys manufacturing companies with the intention of improving their performance and selling them. In August, it sold Marelli Motori SpA, an Italian maker of electric generators and motors, to Carlyle Group LP for 212 million euros ($287 million).
“We see this as another example of the company’s successful ‘buy, improve, sell’ strategy and expect management’s attention to turn to new acquisition opportunities in the coming months,” Andrew Carter, an analyst at RBC Capital Markets LLC in London, said in a note to clients.
The value of Crosby and Acco increased threefold since Melrose bought the companies in 2008. The company will use the proceeds to pay off debt and finance a return of capital to shareholders, according to Carter.
Crosby and Acco do about 70 percent of their business in North America, said KKR’s Stavros. The investment firm plans to expand the companies internationally and may consider acquisitions to accelerate the process, he said.
KKR, which manages $83.5 billion in assets, was advised by Rothschild Group and Simmons & Co. International. It got additional advice from Morgan Stanley, UBS AG, RBC and Kirkland & Ellis LLP. The deal is expected to be completed by year-end.