Employing approximately 6,800 people in the US, Germany, and Slovakia, Elster supplies thermal gas systems and electricity meters. The company also manufactures flow computers and regulators for the gas industry.
The proceeds from the transaction will be used by Melrose to finance capital return of £2bn to shareholders and for general corporate purposes, including repayment of debts.
Honeywell chairman and CEO Dave Cote said: "The Honeywell Operating System (HOS) will be a major factor in creating new synergies that will increase the growth and profitability of each of Elster’s businesses.
"Elster’s differentiated technologies, extensive industry expertise, and relationship with utility customers globally – combined with their strong positions in the highly regulated heating, controls, and metering segments – are a great fit for Honeywell’s portfolio."
Subject to approvals from Melrose shareholders and regulators, the transaction is planned to be completed in the first quarter of 2016.
The deal is expected to create organic and inorganic growth opportunities for Honeywell.
"Elster also creates a new platform for acquisition targets for Honeywell that will be additive to the business’ growth and global presence.
"We expect that energy efficiency initiatives and mandates and the increased need for natural resource management will drive meaningful and sustained growth for Honeywell in the metering segment," Cote added.
