This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Eaton Buys Cooper in 2012's Biggest U.S. Merger (Update 1)

Stocks in this article: ETN CBE BGC DHR HUB.B

In Feb. 2011, Danaher bought Beckman Coulter for $5.87 billion, but it may now be able to absorb a new deal, noted Mitchell, who lists industrial products conglomerate SPW (SPX) and Invensys (ISYS) as other names to watch in the industrial sector M&A game.

Cooper Industries was founded in 1833 and Eaton was founded in 1911. While Eaton has key businesses related to automation and power monitoring, Cooper Industries adds to the company's power transmission and distribution offerings.

"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 Eaton CEO Alexander Cutler in a statement.

By acquiring Cooper Industries, Wells Fargo analysts note that Eaton's business mix will tilt toward electrical products. After the deal, the new company's proforma 2012 revenue will be roughly $23 billion, with 58% of revenue coming from electrical products and 42% from industrial products servicing the auto, transportation and aerospace sectors.

Although Eaton's acquisition of Cooper Industries does not come cheap and is at the upper end of valuations paid in sector, the deal is expected to eventually add significantly to earnings through a mix of growth, cost synergies and tax benefits, notes Jefferies analyst Stephen Volkmann.

Roughly 30% of Cooper Industries' revenue comes from its lighting and fire & security business that has no overlap with Eaton, notes Volkmann. Meanwhile, Cooper Industries' exposure to residential construction and commercial construction end markets may be hitting a trough, with upside in a recovery, adds Volkmann, who rates Eaton a buy with a $60 price target. Still there are overlaps in the merger, including Cooper Industries' power systems unit where it specializes in small transformers, and its Bussman unit that makes circuit protection products and vehicle power distribution.

"While the multiples are towards the upper end of the range for historical transactions within the space there is an argument to be made for acquiring a premier market participant such as Cooper," Volkmann argued in a Monday note to clients.

The deal is expected to added 35 cents to Eaton's operating earnings per share by 2014 and by 45 cents in 2015. Eaton shareholders are expected to own approximately 73% of the combined company while legacy Cooper shareholders are expected to own approximately 27%.

In midday trading on Monday, Cooper Industries shares rose over 26% to over $70, a little below Eaton's offer price. Eaton shares were up 1%.

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

2 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs