Eaton Buys Cooper Industries for $11.8 Billion

by Christopher Freeburn | May 21, 2012 2:06 pm

Eaton (NYSE:ETN[1]) will purchase Irish electrical manufacturer[2] Cooper Industries (NYSE:CBE[3]) for $11.8 billion and will re-incorporate in Ireland as Eaton Global Corp. PLC.

The deal values Cooper at $72 a share. Eaton will pay $39.15 in cash and issue 0.77479 of its own shares for each Cooper share. That means Eaton will pay a 29% premium to acquire the electrical products manufacturer, according to Reuters.

Cooper shares shot up more than 25% on Monday, breaking above $70 a share, while Eaton shares rose fractionally.

In order to finance the purchase, Eaton has arranged a $6.75 billion bridge loan through Morgan Stanley (NYSE:MS[4]) and Citibank (NYSE:C[5]). It will also rely on cash reserves and issue new debt.

The company said the acquisition of Cooper would boost its bottom line by 35 cents a share in 2014 and 45 cents the year after that. It would also cut costs by $535 million a year within four years.

Current Eaton Chairman and CEO Alexander Cutler will head the new company. Eaton shareholders will own roughly 73% of the combined company.

Endnotes:
  1. ETN: http://studio-5.financialcontent.com/investplace/quote?Symbol=ETN
  2. purchase Irish electrical manufacturer: http://www.reuters.com/article/2012/05/21/eaton-cooper-idUSL4E8GL9AM20120521
  3. CBE: http://studio-5.financialcontent.com/investplace/quote?Symbol=CBE
  4. MS: http://studio-5.financialcontent.com/investplace/quote?Symbol=MS
  5. C: http://studio-5.financialcontent.com/investplace/quote?Symbol=C

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