2 Big Manufacturer Deals

Earlier this week we commented on Rexel’s acquisition of Platt.  Now let’s turn to the big manufacturer deals that were announced – Eaton buying Cooper and General Cable buying Alcan, with the Eaton / Cooper deal capturing more industry attention.

Eaton / Cooper

• The Eaton / Cooper deal is a direct response to the ABB / T&B deal.  How do we know? Discussions commenced in February (according to documents filed by Eaton) and the ABB/T&B announcement was late January … coincidence?
• Eaton and Cooper managements have been close over the years, should be a good fit.
• The new organization will have significant breadth for a customer, providing additional products to end-users to connect to their distribution equipment and controls as well as upstream to utilities (through Cooper Power Systems).  Potentially some nice synergies for customers if they can figure out how to get the various divisions / silos to work together.
• Interesting that Eaton became an Irish company (which Cooper was).  A way to “save” taxes and put money outside the country.  Perhaps this money will be used for non-US acquisitions?
• Some input we heard:
• It is a big move, landscape changer. It will get the attention of RA. I like the ability to go deep on power management.
• Smart move. It immediately combines to become my #2 vendor $ wise. I like it for us
• Good fit
• Trouble for Rockwell, Siemens and GE
• Eaton now has large transformers and is in the distribution game across the board , it will be interesting if the divest the little pieces like devices and boxes and fittings. Put’s GE and Siemens on the defensive, who will buy who ?
• Makes me wonder whom Siemens will buy – Hubbell or Acuity
• Shocked
• Borrowed heavily.  Trying to keep up with the Jones’ (ABB)
• Dual line distributors will probably be pressured to convert as Eaton needs the incremental business to pay the debt.
• Nice move to increase breadth of offering. Hopefully they don’t do what the old T&B did … leverage distributors to get business.

So, what could Rockwell, GE, Siemens and Schneider Electric do?

• Does GE buy Rockwell?
• Rockwell buy GE?
• Rockwell focus on industrial and further diversify itself in that market (maybe look at some Encompass Partner companies or other automation / control / power management plays)?
• Should Siemens buy Hubbell? Perhaps take the proceeds from doing an OSRAM IPO and invest them in Hubbell?
• Should ABB buy GE Industrial to gain a distribution equipment line?
• Should Schneider Electric purchase Hubbell? It could combine Hubbell Lighting with Juno and Schneider also has a wiring device line that could integrate with Hubbell Wiring Devices to broaden that package?
• Could Legrand be intriguing for an acquirer? Years ago, Schneider was interested in Legrand (worldwide).  Perhaps Schneider would be interested in Legrand NA (Pass & Seymour, Wiremold, WattStopper, etc)

Or can any of these happen given that …

• Jeff Immelt this week said that the company, “for the time being”, will focus on bolt-ons in the $1-3 billion range.  Hubbell and Rockwell would noth go for much more than than.
• Tim Powers from Hubbell said “”As far as Hubbell is concerned, we don’t see that changing our competitive balance.  “The markets and market positions we are involved in we don’t think are threatened by either one of these deals.”  Hubbell, which has made a series of small takeovers in the past six months, expects to make more acquisitions.  “We do have some opportunities that are bigger than bolt-on and we are anxiously pursuing them, too.”  But Tim is also expected to retire at the end of the year due to a company retirement policy.
• Joe Hogan from ABB recently said, “he will focus on integrating the acquisition and ruled out any further large deals in the near term.  “Don’t expect a $2 billion plus deal from ABB… this year,” which would effectively rule out GE.
• Schneider, according to analysts, only has $3.6B in cash (but given the amount Eaton borrowed, presumable Schneider could similarly borrow).  Acuity could also make a good fit with Schneider – integrating with Juno and Sensorswitch integrating with Schneider’s lighting controls offering.

Who knows … (and Jeff, Tim and Joe said this last week…)

But the deal makes sense.  Eaton, as a corporation, now touches power generation (utilities and the power generation sources – petrochem, renewables) down to energy efficiency (lighting and conceivable controls) while also being involved in some of the infrastructure aspects of the electrical industry.  Given Eaton’s penchant for growing through acquisitions, they could fill in the holes.

General Cable Buys Alcan

Makes sense.  Call on same customers, complementary products (and aluminum becomes the alternative to copper when copper pricing skyrockets).  Could represent opporunity for for Encore as they will be a full line aluminum provider in August. Rather than Alcan being a standalone aluminum company, now we have copper companies offering the full package.  According to a few distributors, General Cable still needs an NMB and MC line (United Cable anyone).

Lot’s of money was spent in the electrical industry this week. Money is cheap but, perhaps more importantly, there are people who see opportunity in the electrical industry … due to the need to upgrade the infrastructure, industrial growth, energy generation and efficiency, a slow recovery (vs. the alternative), the fact that the US is a better market than other places in the world. But industry consolidation will affect the industry.

Times they are a changing!!

Thoughts on these deals?