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Eaton Acquires Cooper Industries; More Consolidation to Come?

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The shares of electrical equipment supplier, Cooper Industries (NYSE: CBE) are soaring pre-market after the company announced it will be acquired by Eaton Corporation (NYSE: ETN) for $11.8 billion.

Under the terms of the transaction, Eaton will pay $39.15 in cash and 0.77479 shares of New Eaton per each Cooper share. Based on Eaton's closing price on Friday, Cooper Industries shareholders will receive a total compensation of $72.00 per share. The merger is expected to generate $535 million in annual synergies by 2016. Also, it is expected to to be accretive to the company's operating EPS by $0.35 in 2014 and by $0.45 in 2015. This excludes the non-cash expense related to the amortization of intangibles, which arises from purchase accounting. Lastly, the takeover is expected to be accretive to operating EPS by $0.65 in 2014 and by $0.75 in 20152

Last week, Cooper Industries' competitor, ABB (NYSE ABB) completed an acquisition of Thomas & Betts. Hence, it is possible that the industry trend is towards consolidation and the future mergers could provide an opportunity to make profit.

Cooper Industries is currently trading at $69.56, a gain of $13.72 or 24.57% and Eaton Corporation at $42.11, a loss of $0.29 or 0.68%.

Posted-In: Long Ideas News M&A Trading Ideas

 

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