Honeywell has agreed to buy RAE Systems, Inc. for US$340 million from its private equity owners, Vector Capital and CITIC Capital Partners.
Headquartered in San Jose, California and founded in 1991, RAE Systems manufactures intelligent gas and radiation detection systems used in more than 120 countries.
Honeywell’s price represents approximately 13 times RAE Systems’ estimated 2013 earnings before interest, taxes, depreciation and amortization (EBITDA). RAE Systems had sales of US$107 million in 2012. The deal is expected to close in the second quarter of 2013, according to a statement issued by Honeywell.
In June 2011, San Francisco-based American private equity firm Vector Capital and Hong Kong-headquartered CITIC Capital Partners took RAE Systems private for US$138 million.
The Honeywell acquisition comes less than two years after the private equity firms’ buyout, with a price tag 2.5 times that of the buyout deal. It demonstrates how private equity firms are increasingly making profitable exits by selling to cash-rich multinationals.
Vector Capital and CITIC Capital Partners also worked together to take New York Stock Exchange-traded Gerber Scientific Inc. private in August 2011 for US$283 million.
Connecticut-based Gerber Scientific supplies sophisticated automated manufacturing systems for sign making and specialty graphics. CITIC took a minority stake in this deal and it is not clear if Gerber Scientific has any presence in China.
Vector Capital currently manages US$2 billion. Part of the firm’s strategy is to selectively take undervalued public companies private, and potentially spin out non-core businesses from corporations and fix balance sheets through recapitalizations.
CITIC Capital Partners is the private equity arm of CITIC Capital and currently manages US$2.6 billion. It invests in companies globally that look to grow in China. At the time of RAE Systems’ buyout, CITIC’s managing director, Brian Doyle, said CITIC will "help RAE strengthen its sales, research and development, and manufacturing… in China.”