Manufacturing investor Melrose PLC has revealed it is in talks over a £1.47 billion takeover of a German engineering firm.

Alcester-based Melrose (MRO), which last year walked away from a bid for toolmaker Charter International, confirmed it was now in discussions with the board of Elster Group regarding a recommended cash offer.

Melrose, however, said it would not go ahead with the acquisition without a recommendation from Elster’s board or an undertaking from Elster’s largest shareholder, Rembrandt Holdings.

It said due diligence which is currently on-going and any transaction would be funded through a combination of new debt and a fully underwritten rights issue to existing Melrose shareholders.

Melrose said, in a statement: "The board of Melrose will only proceed with the transaction if it meets Melrose’s acquisition criteria, including the terms on which financing for the transaction can be raised. This will include, but not be limited to, the Melrose share price at the time of announcement."

Elster, which is incorporated in Germany, is listed on the New York Stock Exchange and currently has a market capitalisation of £1.21 billion.

Elster is one of the world’s largest providers of gas, electricity and water meters.

The Post reported in September that Melrose decided not to make an offer for Charter, a maker of welding tools and gas and air handling equipment, after its sweetened offer was trumped by Colfax’s £1.53 billion bid.