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The biggest industrial merger of 2012 is good news for shareholders of both companies.
Eaton (ETN), an engineering giant with a current market cap of just over $14 billion, is acquiring electrical equipment supplier Cooper Industries (CBE) for a cool $11.8 billion. Terms of the merger, which is actually a stock buyout offer, stipulate that Cooper shareholders will receive $39.15 in cash and 0.78 shares of Eaton for every Cooper share they own. The merger is expected to take effect sometime in the second half of the calendar year.
Cooper shares skyrocketed today on news of the deal. The mid-cap stock (market cap: $11 billion) climbed 25% to reach a new 52-week high of $69.88 per share. That bumps Cooper up close to the $72-per-share value the merger terms placed on the company. Cooper shares were only trading at $55.84 a pop when the market closed last Friday.
While Eaton’s shares didn’t get the same bump – in fact, the stock fell 0.7% on Monday – the deal to buy Cooper is expected to increase the Cleveland-based company’s revenues by about a third. Given that Cooper is headquartered in Ireland, the deal will also expand Eaton’s geographic reach. That will also give Eaton the potential tax benefit of being able to reincorporate in Ireland.
Eaton is a 100-year-old company. But Cooper has an even longer history that dates back to its 1833 founding. Cooper boasts a diverse array of electrical products ranging from fuses to LED lighting to transformers and power capacitors.
Cooper shares are now up 29% year-to-date. Eaton’s stock is actually down 3.4% this year.