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Honeywell acquires RAE Systems for $340M

by Lou Whiteman  |  Published April 23, 2013 at 4:21 PM

Honeywell International Inc. said Tuesday it would acquire private equity-owned RAE Systems Inc. in a $340 million deal designed to expand the buyer's portfolio of products used to detect gases and other dangerous materials.

San Jose, Calif.-based RAE makes a line of personal, hand-held, transportable and fixed gas, radiation and photo-ionization sensing and detection devices for government, energy, industrial and emergency responder customers. The company, which is owned by Vector Capital Corp., generated sales of about $107 million in 2012, with products used in more than 120 countries.

The deal is priced at about 13 times RAE's estimated 2013 Ebitda, and is expected to close in the current quarter.

Honeywell, led by CEO David Cote, said it would combine RAE with its Honeywell Analytics unit. Mark Levy, chief of Honeywell Life Safety, in a statement called RAE "a very compelling strategic fit" with his company's existing offerings.

"RAE Systems' geographic, manufacturing and distribution footprint, especially in high-growth countries like China, will help to make our already-strong gas detection portfolio an even greater global franchise in a very good industry," Levy said.

Honeywell has built its life safety business via acquisitions, with deals including a purchase of Zellweger Analytics Inc. in 2005 for undisclosed terms; a $634 million acquisition of First Technology plc a year later; and its $1.4 billion acquisition of Sperian Protection SA in 2010.

The deal is a quick turnaround for Vector Capital, which outbid Battery Ventures to acquire RAE in June 2011 for $138 million. RAE said in the time since the deal it has focused on expanding its product offerings and expanded its global presence.

Company CEO Robert Chen said that RAE's products are complementary to what Honeywell already offers.

"As part of Honeywell, we will enjoy the scale and global presence to expand the reach of our portfolio, including in high-growth markets like Brazil and Russia," Chen said. "This transaction will also be beneficial to our customers and distribution partners, providing them access to an expanded portfolio of gas and sensing technologies and a comprehensive range of additional life-safety solutions."

Citigroup Global Markets Inc. is acting as financial adviser to RAE Systems and Vector Capital, with Shearman & Sterling LLP serving as legal adviser.

Tags: Citigroup Global Markets Inc. | David Cote | Ebitda | Honeywell Analytics | Honeywell International Inc. | Mark Levy | RAE Systems Inc. | Robert Chen | Shearman & Sterling LLP | Vector Capital Corp.

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