The European Commission has approved the merger of
). This merger is expected to close in the second half of the
year. Eaton is a renowned power management company while Cooper
Industries specializes in electrical equipments. The merger
allows both the companies to expand their reach in the global
power market, both technically and geographically.
Eaton is leading power management company that provides
energy-efficient solutions to its customers worldwide. Similarly,
given the rising investments in the energy sector worldwide,
Cooper also has made key global investments, acquisitions and
also has created new products in order to benefit from this
Therefore, the combination of the two is expected to provide
critical energy saving technologies generating annual synergies
of approximately $535 million by 2016. Further, given the
geographical reach of Cooper, the combined company intends to
accelerate its long-term growth by increasing its global presence
to attractive end markets.
The agreement announced on May 21, 2012 is as per the Irish
Takeover Rules. The newly formed company will be based in
Ireland, the current location of Cooper Industries. The combined
entity will be called Eaton Corporation plc. As per the
agreement, Cooper Shareholders will receive $39.15 in cash and
0.77479 shares of New Eaton for each Cooper share.
Total equity value of the transaction has been fixed at $11.8
billion. Eaton shareholders are expected enjoy approximately 73%
share new company while Cooper will have a share of approximately
27%. The acquisition will be financed through a combination of
debt, equity and cash.
On GAAP basis, the new company is expected to be accretive to
earnings by 35 cents in 2014 and by 45 cents in 2015, while on
proforma basis, the deal is expected to increase earnings by 65
cents and 75 cents, respectively. Excluding the non-cash expense
related to the amortization of intangibles arising from purchase
accounting, positive effect from the acquisition is expected to
be 65 cents in 2014 and 75 cents in 2015.
The electrical offering of Cooper includes electrical
protection, power transmission and distribution, lighting and
wiring components. Cooper's offering specializes in provision of
efficient and safe energy solution to customers globally.
Further, Eaton leads in power distribution, power quality,
control and automation, power monitoring, and energy management
products and services, offering managerial solutions for
challenges in electrical, aerospace, hydraulics and vehicle
sector. The combination allows the companies to enter new related
industries, exploit emerging markets and provide wide technical
service to customers globally.
Currently, we are maintaining a Zacks #2 Rank (short-term Hold
recommendation) on Eaton Corporation and a Zacks #3 Rank on
COOPER INDS PLC (CBE): Free Stock Analysis
EATON CORP PLC (ETN): Free Stock Analysis
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