UPDATE 2-Eaton to buy Cooper Industries for $11.8 bln

Mon May 21, 2012 10:07am EDT

Related News

* Eaton to pay 29 pct premium for Cooper

* New Eaton to be incorporated in Ireland

* Cooper shares jump 25 pct, Eaton down 0.8 pct

May 21 (Reuters) - Diversified industrial manufacturer Eaton Corp struck a deal to buy electrical equipment maker Cooper Industries for $11.8 billion in cash and stock, paying a 29 percent premium to broaden its services to the electrical industry.

Eaton, announcing the deal on Monday, also said it would reincorporate in Ireland, where Cooper is based.

Eaton will pay $72 per share for the acquisition: $39.15 in cash and 0.77479 share for each Cooper share.

Cooper shares rose nearly 25 percent to $69.77 in morning trading, while Eaton was down 0.8 percent at $42.08.

The deal will help Eaton diversify geographically, said Catherine Avery, chief executive officer of CAIM LLC, which holds shares of the company.

"It's a pretty amazing deal," Avery said. "They're going to dominate that electrical power equipment segment. It's taking a long-term point of view and saying: 'There are areas of the globe that are expanding and when we do get into a better economic environment, we're going to be there.'"

A deal this size will prompt smaller industrial companies to consider selling themselves, Avery said, without identifying potential targets.

Eaton said the deal should generate $535 million in annual cost savings by 2016 and add to its earnings by 35 cents per share in 2014 and 45 cents in 2015.

Eaton has secured a $6.75 billion bridge financing commitment from Morgan Stanley and Citibank to pay for the cash portion of the deal. It said it planned to issue new debt, use cash on hand and possibly sell some assets to pay down the loan.

Other large U.S.-listed industrial stocks were higher across the board. Parker Hannifin Corp rose 1.9 percent, Emerson Electric Co gained 0.6 percent and General Electric Co was up 0.5 percent.

Citi and Morgan Stanley advised Eaton on the deal, while Goldman Sachs advised Cooper.

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