Eaton is Selling its Lighting Business to Signify for $1.4 Billion

October 17, 2019 by Paul Shepard

Power management company Eaton has entered into an agreement to sell its Lighting business 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.

Eaton's Lighting business is one of the world’s leading providers of LED lighting and control solutions. Its broad range of innovative products and systems are designed to maximize performance and energy efficiency. The business, which had sales of $1.7 billion in 2018, serves customers in commercial, industrial, residential and municipal markets.

“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.

Summary of the transaction provided by Signify:

  • Signify to acquire Cooper Lighting Solutions from Eaton for USD 1.4 billion in cash
  • Clear strategic fit:
    • Strengthening Signify’s market positions in North America, with increased innovation power and more competitive offerings;
    • Improving the business mix with Professional revenues increasing from 42% to 53% of total sales
  • Respective agent networks and front office functions will continue to operate independently
  • Substantial value creation opportunity: cost synergy potential with savings of more than USD 60 million per year, to be largely achieved in the first three years
  • Compelling financial metrics: mid-teens EPS accretion in year 1; transaction ROIC to exceed WACC after year
  • Transaction fully funded with debt; committed bridge financing in place
  • Upon closing of the acquisition:
    • Capital allocation priority is to deleverage. Strong free cash flow expected to drive down the net leverage ratio from around 2x at closing to below 1x net debt/EBITDA within three years
    • Continue to pay a stable or increased dividend per share

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. LLC., is acting as financial advisor to Eaton.