Power management company Eaton has announced its agreement to sell off its US lighting subsidiary, Cooper Lighting solutions to Signify N.V. for a cash purchase price of $1.4 billion.
The decision to sell the lighting business comes after completing a comprehensive review of various potential transaction alternatives to maximize shareholder value.
Signify shares rose by more than 4.5% in early trading following the announcement., 4.6% to €25.00, after the company said the deal would add to earnings per share in the first year and lead to cost savings of $60 million annually within three years.
The acquisition is the largest by the Dutch lighting company which is recognised as the world’s largest lighting manufacturer, formerly known as Philips Lighting, before being offloaded in 2016.
The deal will likely boost Signify’s position as the No. 2 player in the professional lighting market globally, and in North America, where, according to CFO Stephane Rougeot noted, scaling will help its battle with competitors like Acuity Brands Inc.
“The rationale from a strategy standpoint is to get a much stronger market position in North America in professional,” he said in a telephone interview.
“With Cooper we are getting a very large player in North America professional. They have great market positions, they have a large agent network, they have very deep customer relationships, they have great brands over there.”
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"Today's announcement is another example of how we are actively managing our portfolio to create value for our shareholders," said Craig Arnold, Eaton chairman and chief executive officer.
The transaction is subject to customary closing conditions and regulatory approvals and is expected to close in the first quarter of 2020. Goldman, Sachs & Co. is acting as financial advisor to Eaton.