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Eaton buys Moeller and Phoenixtec to create $7.5bn electrical business

20 December, 2007

The US-based Eaton Corporation is buying Germany’s Moeller Group from its private equity owner for €1.55bn. Eaton is also buying the Phoenixtec Power Company, a Taiwanese manufacturer of single- and three-phase uninterruptible power supplies (UPSs), for around $565m.

Together, these acquisitions which will increase significantly the capabilities, size, and geographic breadth of Eaton’s electrical business. Their combined sales for 2007 are estimated to be worth a total of some $2bn.

"These two transactions further establish Eaton as a leading global supplier of electrical power distribution and control products as well as power quality equipment and systems," says Eaton’s chairman and chief executive, Alexander Cutler. "Once these acquisitions close, our electrical business will have annual revenues in excess of $7.5bn. Further, Eaton’s mix of international revenues, based on final destination of our products, will be between 55–60%."

Eaton is buying Moeller from the UK-based private equity firm, Doughty Hanson, which has held a majority (75%) stake in the German industrial and building controls manufacturer since mid-2005, when it bought the stake from Moeller’s previous owner, Advent International, for €1.1bn.

Moeller supplies components for commercial and residential building applications, and industrial controls for industrial equipment applications, and sells its products mainly in Europe and in the Asia-Pacific region. The transaction, expected to close in the first quarter of 2008, is subject to regulatory approvals and other closing conditions.

During 2007, Bonn-based Moeller has achieved estimated sales worth €1.02bn and an EBITDA of €170m. The company has 15 global production sites, sales offices in more than 90 countries, and employs around 8,700 people.

Phoenixtec’s 2007 sales are worth an estimated $495m and its 2007 EBITDA is expected to be $52m. The Taiwan-based company has manufacturing sites in China and Taiwan, and employs around 5,800 people.

Phoenixtec`s chairman and board members have agreed to tender shares representing 25% of the company to Eaton. The deal is subject to regulatory approvals and conditions, including the condition that at least 51% of Phoenixtec’s shares must be tendered to Eaton.

The two acquisitions "clearly underscore Eaton’s success in expanding our electrical business globally," says Cutler. "The Moeller Group’s broad portfolio of power distribution and control products that meet IEC standards, along with its strong distribution network in both Western and Eastern Europe and its large-scale production facilities in several Eastern European countries, will significantly expand our competitiveness in electrical markets outside the US.

"We are equally excited about the acquisition of Phoenixtec," Cutler adds. "The company’s leadership position in the Chinese and Taiwanese power quality markets provides us a strong foundation to sell our entire range of power quality products. In addition, the company’s engineering capabilities and its manufacturing facilities in Taiwan and China provide us the products, technical knowledge, and competitive manufacturing footprint to greatly expand our global power quality business."

Cutler expects the acquisitions to be neutral to Eaton’s operating earnings per share in 2008, and accretive by $0.25–0.35 per share in 2009. Eaton’s 2008 outlook, including the acquisitions, is for revenues to expand by 25% and operating earnings per share to grow by 15–20%. Eaton will be financing the acquisitions using a mixture of cash, debt and equity.

Eaton is a diversified industrial manufacturer with 2006 sales worth $12.4bn. It is a global leader in: electrical systems and components for power quality, distribution and control; fluid power systems and services for industrial, mobile and aircraft equipment; truck drivetrain systems; and automotive engine air management systems, powertrains and specialty controls. Eaton has 63,000 employees and operates in more than 140 countries.




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