) has received approvals for its proposed
Cooper Industries plc
) acquisition from South Korea's Korean Fair Trade Commission and
the Turkish Competition Authority. This clearance is a part of the
acquisition procedure. A few days ago, the company received
acquisition-clearance from the Competition Bureau of Canada. The
closure of this transaction is subject to some other regulatory
clearances and approvals from shareholders of both companies.
COOPER INDS PLC (CBE): Free Stock Analysis
EATON CORP (ETN): Free Stock Analysis Report
To read this article on Zacks.com click here.
Per the agreement, Eaton shareholders will acquire ownership of 73%
of the combined entity while Cooper shareholders will own 27% of
the same. The shareholders of Cooper are expected to receive $72.00
per share based on the closing price of Eaton common stock as of
May 18, 2012. This includes a cash consideration of $39.15 per
share and 0.77479 shares of the newly formed company for each
Cooper share. On the other hand, the shareholders of Eaton will
obtain one share of the new company in exchange of each share of
Eaton common stock.
Cooper is an electrical-equipment supplier, dealing in electrical
protection, power transmission and distribution, lighting and
wiring components. These products improve energy efficiency and
Following regulatory and shareholder approvals, the new
organization will be named Eaton Global Corporation Plc and will be
based in Ireland. The shares of the new entity will be registered
with the U.S. Securities and Exchange Commission and trade under
the symbol of ETN on the New York Stock Exchange.
The acquisition will be financed with a combination of cash, debt,
and equity. As of June 30, 2012, Eaton had a cash balance of $525
million. In addition, the company has already secured $6.75 billion
fully underwritten bridge financing commitments from several
multinational institutions to finance a part of this acquisition.
Eaton expects this deal to generate a cost synergy of $535 million
by 2016. The acquisition is expected to be accretive to the
company's earnings by 35 cents and 45 cents in 2014 and 2015,
respectively. Excluding non-cash expense associated with
amortization of intangible assets owing to purchase accounting, the
acquisition is expected to increase operating earnings per share by
65 cents and 75 cents in 2014 and 2015, respectively.
In view of Eaton's last few acquisitions, it is evident that the
company intends to diversify its portfolio while expanding its line
of businesses as well as its global footprint. After second-quarter
2012, the company acquired South Korean firm Jeil Hydraulics Co.,
Ltd. and intends to buy Chilean electrical manufacturer Rolec
Comercial e Industrial S.A.
As of June 30, 2012, Eaton had cash and short-term investments of
$1.18 billion compared with $1.08 billion as of December 31, 2011.
We believe the company's strong cash position enables it to pursue
a steady inorganic growth approach.
Following an aggressive acquisition strategy, Eaton already
experienced positive results in second-quarter 2012. In the last
couple of quarters, the company inked some significant deals, which
include the acquisition of IE Power, Inc. and E.A. Pedersen
Company. Riding on these acquisitions, sales of the company's
Electrical Americas segment improved 1% year over year.
However, we are skeptical about slow economic growth rate in the
emerging countries and volatile currency market conditions, which
might have a negative impact on Eaton's forthcoming performance.
Cleveland, Ohio-based Eaton Corporation offers an array of
products, such as powertrain, truck and automotive systems,
electrical components and systems, hydraulics and pneumatic systems
for commercial and military use. Eaton Corporation currently
retains a short term Zacks #4 Rank (Sell Rating).