Eaton Corp., the U.S. industrial equipment manufacturer, has agreed to buy Cooper Industries, a maker of electrical equipment, in a deal that values the target’s equity at about $11.8-billion (U.S.).
Cooper is almost the same size as Eaton, which has a market capitalization of about $14.3-billion.
The merged company will be known as Eaton “or a variant thereof”, and led by Sandy Cutler, Eaton’s chief executive. However, after the deal closes, Eaton will move its registration to Ireland, where Cooper is incorporated today.
Mr. Cutler said in a statement that the deal would bring together the two companies’ product lines and Cooper’s international distribution to create “a game changer to serve the electrical industry”.
The companies said the deal would generate about $535-million in annual synergies by 2016.
The terms of the offer are $39.15 in cash and 0.77479 Eaton shares for each Cooper share. Based on Friday’s closing prices, that makes the offer worth about $72 per Cooper share, a 29 per cent premium.
Eaton has reported strong growth in recent years, but its shares have under-performed the S&P 500 index over the past 12 months, in line with the rest of the U.S. machinery sector.
Mr. Cutler told the Financial Times last year that the company was seeking acquisitions, although he suggested smaller acquisitions were more likely than a large deal.
Cooper made an unsuccessful acquisition attempt itself last year, seeking to buy Laird of the UK for £533-million ($843-million U.S.).
Following the announcement, Eaton’s shares were down 1 per cent at $41.94, while Cooper’s were up 25 per cent at $69.85.