Power management company Eaton have entered into an agreement to sell its hydraulics business to Danish industrial company Danfoss for $3.3 billion in cash. This represents a 13.2 multiple of 2019's earnings before interest, tax, depreciation and amortization.
Eaton’s hydraulics business accounted for 86 percent of its hydraulics segment revenue in 2019. The business had sales of $2.2 billion in 2019 and employs approximately 11,000 people. Eaton is retaining the filtration and golf grip businesses currently reported in its hydraulics segment.
"Today’s announcement is part of the ongoing transformation of Eaton into a higher growth company with better earnings consistency," said Craig Arnold, Eaton chairman and CEO. "We believe this transaction will create substantial value for our shareholders and allow our hydraulics employees to be part of a company that has a strong commitment to the hydraulics industry."
"By combining the knowledge and experience of these two companies, our customers will benefit from unmatched expertise from a single partner," said Kim Fausing, Danfoss president and CEO.
The transaction is subject to customary closing conditions and regulatory approvals and is expected to close by the end of the year.
According to Danfoss, the acquisition is in line with its strategy to strengthen its core businesses and enhance customer value.
"Hydraulics is our core, and we have for years strengthened our power solutions business through high customer focus, as well as through significant investments in technology leadership," said Eric Alström, president of Danfoss Power Solutions. "I believe our customers will benefit from combining these two businesses into a full-line hydraulics player dedicated to innovation and with a broad offering of products, robust distribution channels and tremendous geographic reach."
