Eaton to buy Möller, Phoenixtec Power, to boost overseas revenues

Diversified industrial manufacturer Eaton Corp said on Thursday 20 December that it plans to acquire two companies in Europe and Asia to expand its electrical systems business outside the United States.

Eaton offered to buy the Germany-based electrical systems and components maker Möller Group from UK-based private equity group Doughty Hanson for €1.55 billion ($2.23 billion). It also launched a tender offer for the Taiwan-based Phoenixtec Power Co Ltd, which makes uninterruptible power supply systems, at $50 Taiwanese new dollars per share ($1.54 per share), which it said would make the net purchase price $565 million.

Phoenixtec's chairman and members of its board of directors have already agreed to tender 25 per cent of the company's shares to Eaton. Eaton expects the deals to add 25 cents to 35 cents per share to operating earnings in 2009.
 
Möller, which is based in Bonn and employs 8,800, makes systems and parts for power distribution, infrastructure and residential construction. Doughty Hanson owns 75 per cent of the equity, with the remaining stake held by managers. The deal is expected to be completed in the first quarter of next year.

Eaton has 15 production plants globally and is represented in 90 countries. It has annual revenues of $12.4 billion, and is using a mixture of cash, debt and equity to fund the purchase. Its chairman and chief executive Alexander 'Sandy' Cutler said the acquisition of Möller would expand Eaton's presence in markets outside the US.

Following these acquisitions, Eaton's electrical systems will make up 74 per cent of the company's business with annual revenues of more than $7.5 billion, and 55 per cent of sales will come from outside the US.

Cutler would not put a figure on how much of Eaton's business should eventually come from its global operations, but said: "If the United States accounts for 25 per cent of global GDP, then any truly globally capable company would reflect that."

The two companies combined have estimated 2007 sales of $2 billion. Their distribution networks and manufacturing facilities will help boost Eaton's competitive position outside the United States.
 
The company expects the deals to be neutral to operating earnings in 2008 but, including the deals, Eaton expects 2008 revenue to grow by 25 per cent overall and has forecast that 2008 operating earnings per share will grow 15 per cent to 20 per cent.