Industrial equipment manufacturer Eaton Corp. (NYSE: ETN) said Monday it will buy electrical equipment company Cooper Industries Plc (NYSE: CBE) for $11.8 billion to expand into the electrical supplies industry.
Cleveland-based Eaton said shares of Dublin-based Cooper would be traded for $39.15 in cash and 0.77 shares of Eaton. The offer values the shares at $72, based on Eaton's Friday closing price, and represents a 29 percent premium on the deal price, said Eaton.
The deal will create a new company, likely called Eaton Global Corp. Plc, which will be headquartered in Ireland. Alexander Cutler, Eaton's chairman and CEO, will lead the new company. The merger is expected to generate $535 million in cost savings by 2016 and increase operating earnings per share by 35 cents in 2014 and 45 cents in 2015.
“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 Cutler in a statement.
Morgan Stanley (MS) and Citigroup Inc. (NYSE: C) will provide $6.75 billion in bridge financing for Eaton, which plans to replace the bridge loan with $5.1 billion in debt. The acquisition is expected to close in the second half of 2012.
Shares of Eaton fell 31 cents to $42.09 at Monday's market close. Cooper Industries Plc gained $14.04, or 25.1 percent, to $69.88.