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Eaton sells its hydraulics business to Danfoss for $3.3bn

22 January, 2020

Eaton is selling its hydraulics business to Danfoss for $3.3bn in cash, boosting the size of to the Danish group by about one third. The business, which accounted for 86% of Eaton’s hydraulics revenues in 2019, is a global leader in hydraulics components, systems, and services for industrial and mobile equipment.

The business had sales worth $2.2bn in 2019 and employs around 11,000 people. It will be transferred into Danfoss Power Solutions, doubling the size of Danfoss’ hydraulics operation. Danfoss currently has around 28,000 employees worldwide and its 2019 sales were €6.3bn ($7bn).

Eaton is keeping its filtration and golf grip businesses, which are currently reported in its hydraulics operations.

“Today’s announcement is part of the ongoing transformation of Eaton into a higher-growth company with better earnings consistency,” says Eaton’s chairman and CEO, Craig Arnold. “We believe Eaton’s hydraulics business will benefit greatly from being part of a company that has hydraulics at its core.

“When complete,” he adds, “this deal will bring together two talented teams with deep hydraulics knowledge and expertise. And Eaton’s hydraulics team will be part of a company that is committed to becoming a global leader in mobile and industrial hydraulics. The combined business will also benefit customers and distributors by offering industry-leading technology and a much broader portfolio of hydraulic solutions.”  

Danfoss says the acquisition is in line with its strategy of strengthening its core businesses and enhancing customer value.

“Today, we take a significant and transformational step in creating a global leader in mobile and industrial hydraulics,” says Danfoss president and CEO, Kim Fausing. “It is a once-in-a-lifetime opportunity to combine our largely complementary portfolios and geographic footprints.

“Eaton Hydraulics is a highly respected player in the global industry, recognised for its dedicated people and strong brands,” he adds. “By combining the knowledge and experience of the two businesses, our customers will benefit from unmatched expertise from a single partner. With this agreement, we continue to invest in our core hydraulics business and digital solutions to stay a strong technology partner.”

Danfoss CEO Kim Fausing: a once-in-a-lifetime opportunity

According to Danfoss, the two organisations have many similarities, including their company cultures and focus on customers, r&d and quality. Both operate globally, with complementary geographic footprints, and the combined business will have a broader presence across the world. The acquisition will also allow Danfoss to enter the industrial hydraulics market served by Eaton Hydraulics.

“Eaton Hydraulics is a highly respected player in the global hydraulics industry, recognised for its dedicated people and strong brands,” says Fausing. “By combining the knowledge and experience of these two companies, our customers will benefit from unmatched expertise from a single partner.”

The transaction is subject to customary closing conditions and regulatory approvals and is expected to close by the end of the year.

In 2019, the pre-tax income of Eaton’s hydraulics business was $174m, depreciation was $58m and amortisation was $18m, resulting in an EBITDA of $250m. The sale price is 13.2 times the 2019 EBITDA. For the filtration and golf grip businesses, which Eaton is keeping, 2019 pre-tax income was $88m and the EBITDA was $101m. 

Eaton is a power management company and in 2018 generated sales worth $21.6 billion. It has around 101,000 employees and sells products to customers in more than 175 countries.




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