Invensys sells sensor business to Honeywell for £256m

Invensys, the ailing engineering group, yesterday revealed the latest in a string of disposals aimed at reducing its £3.3bn debt pile. The industrial conglomerate Honeywell has agreed to pay $394m (£256m) in cash for Invensys Sensor Systems.

The debt-laden engineer has raised £900m this year through the sale of several divisions.

Rick Haythornthwaite, the chief executive who recently replaced Allen Yurko to improve Invensys' profitability, said the company was on track to meet its target of raising £1.5bn by May 2003. Shares in the company surged 12 per cent to 68.75p on the news.

"We are pleased with the speed at which we have achieved this divestiture. The disposal process for the other non-core businesses remains on track for completion before our financial year end," he said.

The three remaining businesses up for sale are Rexnord, which is considered the most attractive and has an estimated value of about £670m, Motors and Drive Systems. These had combined sales of £930m last year.

Invensys told shareholders in May there were few signs of an early recovery in US demand and it was unlikely second-half performance would improve this year. It posted a 41 per cent drop in annual profits.

The restructuring plans were unveiled in February after a string of profit warnings that ended up in 11,000 job cuts and forced the resignation of Mr Yurko. The group said it intended to cut its size by a third by selling off non-core businesses.

Analysts have expressed concerns over Invensys' ability to achieve good prices for the businesses it is looking to dispose off in the current market downturn.

Credit Suisse First Boston has already reduced its price target on the company this year. UBS Warburg said although Invensys would find buyers for its businesses, it would have to take a 20 per cent discount on their fair value.

But Deutsche Bank yesterday confirmed its buy rating on the stock, saying the sale price was about 15 per cent better than expected and said Invensys shares looked "very attractive".

Mr Haythornthwaite, who was chief executive of Blue Circle before joining Invensys, plans to turn Invensys into a company with only two core divisions that sell equipment for factory automation systems and energy management.

The Sensor Systems business is based in North Carolina and has about 2,700 workers. The businessgenerated revenues of $251m last year.