(By Balaseshan) Eaton Corp. (NYSE:ETN), a maker of power management products, said it agreed to buy Cooper Industries plc (NYSE:CBE) for $72.00 per share, a 29% premium over Friday's close, to broaden its focus in the electrical business.
Under the terms of the 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 on May 18, Cooper Shareholders will receive cash and shares valued at $72.00 per share, representing a premium of 29% and a total transaction equity value of about $11.8 billion.
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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 Cutler, Eaton's current chairman and chief executive officer.
Eaton Shareholders are expected to own about 73% of the combined company while legacy Cooper Shareholders are expected to own about 27%. 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 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 shareholders of Eaton and Cooper.
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Eaton expects the deal to add 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 anticipated to be accretive to operating earnings per share by $0.65 in 2014 and by $0.75 in 2015.
The acquisition will be financed with a mixture of cash, debt, and equity. 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 intends to later refinance these bridge borrowings through a new term debt issuance, use of cash on hand, and the possible sale of assets.
CBE is trading 25.72% higher at $70.20 on Monday, while ETN gains 0.33% at $42.54.