The Elster Group (Client registration required), a provider of products and services for
advanced metering infrastructure, was acquired late last month to the tune of $2.3 billion by Melrose PLC, a British buyout group. This price, $20.50 per share, is a substantial premium on Elster’s stock price, which has hovered around $15 per share over the previous six months, and is 49% more than the June 11, 2012 Elster stock price.
This move is one of the largest since Toshiba acquired Landis + Gyr (Client registration required) in May of 2011, coincidentally enough, also for $2.3 billion. Melrose, however, is putting itself at risk by paying such a hefty price for Elster, a smaller and less successful
smart grid company compared to Landis + Gyr (Client registration required). Additionally, much of the hype around smart meters has died down, with their global deployment slated to slow down over the next few years as the market becomes saturated by 2018 (see the report “The Data Revolution.” (Client registration required).
While Elster is a strong company that will continue to grow within the advanced metering infrastructure (AMI) market, it will hardly grow enough to make up for the 49% premium that Melrose paid for it. That said, rather than face up against these two well-funded players slated to dominate that space, investors should shy away from further smart meter or AMI investments that lack clear differentiators.
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