Eaton to buy Cooper Industries for $11.8 billion

Mon May 21, 2012 7:42pm EDT
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By Nick Zieminski and Michael Erman

(Reuters) - Diversified industrial manufacturer Eaton Corp (ETN.N: Quote) struck a deal to buy electrical equipment maker Cooper Industries Plc CBE.N for $11.8 billion in cash and stock and said it would shift its incorporation to Ireland to save on taxes.

The deal, Eaton's biggest ever, will allow the company to offer a broader range of electrical products, such as lighting and wiring devices, to markets ranging from mining to oil and gas and utilities, and help it expand in emerging markets while cutting costs, Eaton said.

The deal was the biggest of several announced on Monday. Analysts said acquisitions are one way for companies to grow in a sluggish global economy.

"It drives the point home that acquisitions are an increasingly important growth avenue in a slow-growth world," said analyst Matt Collins of Edward Jones. "Record low interest rates and solid balance sheets make it that much easier to get deals done."

Cleveland, Ohio-based Eaton will pay $72 per share for Cooper - $39.15 in cash and the rest in stock. Eaton shareholders will control almost three-quarters of the new Eaton Global Corp Plc, and administrative headquarters will remain in Ohio.

The pricing appears to be fair or "slightly expensive," valuing Cooper at 11.5 times projected earnings, JPMorgan analyst Ann Duignan said.

Cooper shares were up 26 percent at $70.24 in afternoon trading, the day's biggest gainer on the New York Stock Exchange. Eaton stock inched up 7 cents to $42.47.

Incorporating in Ireland will shave about $160 million off Eaton's annual tax bill, said Chief Executive Sandy Cutler, who will lead the combined company. But he said synergies, not tax reduction, were the primary motivation for the deal.   Continued...