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Eaton, Danfoss Required to Divest Assets Before Acquisition

Eaton and Danfoss agree to a proposed settlement agreement to divest certain properties.

The U.S. Justice Department said Wednesday that power-management-systems providers Eaton  (ETN) - Get Report and Danfoss A.S. will be required to divest certain assets before the Denmark-based company is permitted to buy Eaton's hydraulics business.

Shares of the Dublin, Ireland, Eaton closed at $153.40, down 0.4% on Wednesday.

Danfoss and Eaton are two of only three suppliers of
hydraulic orbital motors and hydraulic steering units used in
tractors, wheel loaders, lifts and other types of mobile off-
road equipment in the U.S., according to a Justice Department civil suit and settlement notice filed in the U.S. District Court
for the District of Columbia.

Under the terms of the proposed settlement, the parties must divest three Danfoss orbital motor and hydraulic steering unit facilities located in Hopkinsville, Ky.; Parchim, Germany; and Wroclaw, Poland, and two orbital motor production lines and one hydraulic steering unit production line from Eaton facilities in Shawnee, Okla., and Eden Prairie, Minn., to Interpump Group S.p.A. or an alternate acquirer approved by the United States.

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Without these divestitures, the government said, the transaction would substantially lessen competition in the design, manufacture, and sale of orbital motors and hydraulic steering units used in agricultural, industrial and construction equipment in the United States.

Danfoss had intended to buy Eaton's hydraulics for about $3.3 billion.

 “The transaction, as originally proposed, would have led to higher prices and lower quality for original equipment manufacturers in these industries that are vital to the American economy," Acting Assistant Attorney General Richard Powers of the Justice Department’s Antitrust Division, said in a statement. "The remedy preserves competition in the manufacture and sale of these products for the benefit of equipment manufacturers and consumers.” 

The sale does not have to be completed, however, prior to
the closing of our transaction with Danfoss, an Eaton spokesperson told Bloomberg.

In February, Eaton said it would buy Cobham Mission Systems, a maker of air-to-air refueling equipment, in a deal valued at $2.83 billion.