Diversified industrial manufacturer Eaton Corporation (NYSE: ETN)
(“Eaton”) and electrical equipment supplier Cooper Industries plc (NYSE:
CBE) (“Cooper”) today announced they have entered into a definitive
agreement under which Eaton will acquire Cooper in a transaction that
will significantly increase the capabilities and geographic breadth of
the combined company’s power management portfolio and electrical
The announcement required under the Irish Takeover Rules has been made
(the "Rule 2.5 Announcement") and is available at www.eaton.com.
Founded in 1833, Cooper is a leading supplier of electrical equipment
with a wide range of electrical products including electrical
protection, power transmission and distribution, lighting and wiring
components. This suite of electrical products enhances customer energy
efficiency and safety across a number of end markets globally.
Founded in 1911, Eaton is a global power management company. Its
electrical business is a global leader in power distribution, power
quality, control and automation, power monitoring, and energy management
products and services. Eaton is positioned to answer today’s most
critical power management challenges through its electrical, aerospace,
hydraulics and vehicle businesses.
At the close of the transaction, which is expected in the second half of
2012, Eaton and Cooper will be combined under a new company incorporated
in Ireland, where Cooper is incorporated today. The newly created
company, which is expected to be called Eaton Global Corporation Plc or
a variant thereof (“New Eaton”), will be led by Alexander M. Cutler,
Eaton’s current chairman and chief executive officer.
“This compelling combination of Eaton’s power distribution and power
quality equipment and systems with Cooper’s diversified component
brands, global reach and international distribution creates a game
changer to serve the electrical industry,” said Cutler. “We’re excited
about bringing together two great companies to create shareholder value
and continue our global growth. This combination significantly expands
our ability to better serve our customers with their demands for
critical energy saving technologies as they address the impact of the
world’s growing energy needs.”
“We are extremely pleased to become part of Eaton’s global electrical
business,” said Kirk Hachigian, chairman and chief executive officer of
Cooper. “This combination creates endless opportunities to accelerate
growth and serve our global customers through combining technology,
distribution, penetrating important vertical industries and entering new
emerging markets. The two companies are a perfect fit in every respect.”
The combined company would have had historical 2011 revenues of $21.5
billion and EBITDA of $3.1 billion, and it is expected to enhance
shareholder value by:
Leveraging complementary product offerings between Eaton and Cooper’s
Accelerating long-term growth potential by increasing exposure to
attractive end markets and service opportunities.
Better satisfying customer global demands for energy efficiency and
Generating approximately $535 million in expected annual synergies by
The Acquisition is expected to be accretive to operating earnings per
share by $0.35 in 2014 and by $0.45 in 2015. Excluding the non-cash
expense related to the amortization of intangibles arising from purchase
accounting, the Acquisition is expected to be accretive to operating
earnings per share by $0.65 in 2014 and by $0.75 in 20152.
The Acquisition will be financed with a mixture of cash, debt, and
Under the terms of the Transaction Agreement, Cooper Shareholders will
receive $39.15 in cash and 0.77479 shares of New Eaton for each Cooper
share. Based on the Closing Price for Eaton common stock on Friday May
18, 2012, Cooper Shareholders will receive cash and shares valued at
$72.00 per share, representing a premium of 29 percent and a total
transaction equity value of approximately $11.8 billion3.
Eaton Shareholders will receive one share of the new company for each
share of Eaton that they own upon closing. The transaction will be
taxable, for U.S. federal income tax purposes, to both the Eaton
Shareholders and the Cooper Shareholders.
Eaton Shareholders are expected to own approximately 73 percent of the
combined company while legacy Cooper Shareholders are expected to own
approximately 27 percent. Shares of New Eaton will be registered with
the U.S. SEC and are expected to trade on the New York Stock Exchange
under the ticker symbol ETN.
Eaton has secured a $6.75 billion fully underwritten bridge financing
commitment from Morgan Stanley Bank, N.A., Morgan Stanley Senior
Funding, Inc. and Citibank, N.A. to finance the cash portion of the
Acquisition. Eaton plans to later refinance these bridge borrowings
through a new term debt issuance, use of cash on hand, and the possible
sale of assets.
1 The total expected annual synergies of $535 million
comprise $375 million of pre-tax operating synergies, and $160 million
of global cash management and resultant tax benefits related to the
combined company being incorporated in Ireland.
2 The statement that this acquisition is earnings accretive
should not be interpreted to mean that the earnings per share in the
current or any future financial period will necessarily match or be
greater than those for the relevant preceding financial period.
3 The fully diluted share capital of Cooper assumes full
exercise of the outstanding Cooper share options and vesting of
outstanding share awards under the Cooper Share Plans.
The combination is subject to the terms of a Transaction Agreement among
Eaton, Cooper, New Eaton and certain other parties. The acquisition of
Cooper by New Eaton will be effected by means of a “scheme of
arrangement” under Irish law pursuant to which New Eaton will acquire
all of the outstanding shares of Cooper from Cooper Shareholders for
cash and shares (the “Acquisition”). The Acquisition will be subject to
the terms and conditions to be set forth in the scheme of arrangement
document to be delivered to Cooper Shareholders. To become effective,
the scheme of arrangement will require, among other things, the approval
of a majority in number of Cooper Shareholders, present and voting
either in person or by proxy at a special Cooper Shareholder meeting,
representing 75 percent or more in value of the Cooper shares held by
such holders. Following the requisite Cooper Shareholder approval being
obtained, the sanction of the Irish High court is also required. In
addition, the Transaction Agreement must be adopted by shareholders
holding two-thirds of the outstanding voting shares of Eaton in a
special shareholder meeting. The Acquisition, which is unanimously
recommended by the Boards of Directors of both companies, also is
subject to receipt of certain regulatory approvals and certain other
conditions, as more particularly set out in Appendix III to the Rule 2.5
CONFERENCE CALL WITH EATON
AND COOPER MANAGEMENT AT 10:00 AM EASTERN,
MAY 21, 2012
Eaton’s and Cooper’s conference call to discuss this transaction is
available to all interested parties as a live teleconference today at 10
a.m., Eastern time, in the U.S. at the following phone numbers: U.S.:
800 288 8960; international: +1 612 288 0340. The confirmation number is
249387. This news release can be accessed under its headline on the
Eaton home page at www.eaton.com.
Also available on the website prior to the call will be a presentation
on this transaction that will be covered during the call.
Eaton is a diversified power management company with more than 100 years
of experience providing energy-efficient solutions that help our
customers effectively manage electrical, hydraulic and mechanical power.