Diversified industrial maker Eaton Corp. (ETN) has agreed to acquire electrical products maker Cooper Industries plc (CBE) for about $11.8 billion in cash and stock, the two companies said Monday.
The companies noted that their complementary products and markets create opportunities for growth in the global electrical industry. Shares of Cooper are gaining almost 25 percent in the regular session.
Under the terms of the deal, Cooper shareholders will receive $39.15 in cash and 0.77479 shares of New Eaton for each Cooper share held by them for a total of $72.00 per share. The offer price represents a 29 percent premium to Cooper's closing stock price on May 18 of $55.84.
Eaton shareholders will receive one share of the new company for each Eaton share held by them and are expected to own about 73 percent of the combined company. Legacy Cooper shareholders are expected to own the remaining 27 percent.
The transaction is expected to close in the second half of 2012. Following the closing, Eaton and Cooper will be combined under a new company incorporated in Ireland, where Cooper is incorporated currently.
The new company, expected to be called Eaton Global Corporation Plc or a variant, will be led by Alexander Cutler, Eaton's current chairman and chief executive officer. Shares of New Eaton are expected to trade on the New York Stock Exchange under the ticker symbol "ETN."
Cleveland, Ohio-based Eaton has secured a $6.75 billion fully underwritten bridge financing commitment from units of Morgan Stanley and Citigroup to finance the cash part of the acquisition.
The company plans to later refinance these bridge borrowings through a new issuance of term debt, use of cash on hand, and the possible sale of assets.
The combined company would have had historical 2011 revenues of $21.5 billion and EBITDA of $3.1 billion. The new company is expected to generate about $535 million in expected annual synergies by 2016.
The acquisition is expected 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 amortization of intangibles, the acquisition is expected to add to operating earnings per share by $0.65 in 2014 and by $0.75 in 2015.
In late April, Eaton reported an increase in profit for the first quarter to $311 million or $0.91 per share from $287 million or $0.83 per share in the prior-year period. Net sales rose to $3.96 billion from $3.80 billion last year.
Cooper in early May, reported a share decline in net income for the first quarter to $160.7 million or $1.00 per share from $346.1 million or $2.07 per share in the year-ago period. Revenues grew 9.8 percent to $1.40 billion from $1.28 billion in the same period last year.
CBE is currently trading at $69.77, up $13.93 or 24.95 percent on 1.97 million shares. ETN is trading at $42.17, down $0.23 or 0.54 percent on 3.35 million shares.
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