Signify has announced that it will acquire the lighting business unit of Eaton — the company previously and again recently known as Cooper — for $1.4B (billion) in cash. Signify said the acquisition will strengthen its market position in North America. The acquisition is subject to regulatory approvals, but Signify said it expects to close the deal in the first quarter of 2020.
The original big three in lighting — Philips, Osram, and GE — have been through almost constant business upheaval in recent years. Osram remains in a state of flux after the last ams acquisition bid fell short of shareholder approval. Signify (formerly Philips Lighting), of course, was spun out of Philips in 2018.
Now the Signify acquisition of Cooper comes in the middle of what was a planned moved by Eaton to push its lighting unit out into a publicly-traded company — a plan announced this past March. And it was very recently that Eaton announced that the lighting company would return to its roots and the Cooper brand. Eaton had acquired Cooper Lighting as part of the Cooper Industries acquisition back in 2012.
Signify stated a number of benefits that it would leverage from the acquisition, but two stand out. The company said the Cooper deal will boost its revenues from the Professional sales sector from 42% to 53% of total sales. Increasing that sector revenue share will presumably boost margins significantly.
The company further stated that the deal will deliver $60M (million) in savings per year for the first three years of the deal. Those savings will come from cost synergies in the bill of materials for products, and supply chain and sourcing optimization.
Surprisingly, Signify does not intend to leverage other opportunities for synergistic operations. Specifically, Signify said the two companies will maintain separate front-office operations. The announcement cited that the companies will maintain separate “sales forces, agent networks, product and brand portfolios, and product development teams.”
“Today’s announcement confirms the strategic importance of the North American market for Signify. This acquisition will substantially strengthen our position in this attractive market,” said Eric Rondolat, CEO of Signify, yesterday. “We look forward to welcoming the team from Cooper Lighting. They have built a high-performance company based on professionalism, truly innovative offers, and a long and strong relationship with their customers. We share a genuine passion and single focus for lighting and a successful track record in innovation. We will join forces to further develop connected lighting and provide our customers with the highest level of service while optimizing operational efficiencies.”
Signify said it will fund the acquisition with debt and that it has financing in place. The announcement stated Cooper revenue in 2018 at $1.7B, with 84% of that revenue attributed to LED-based products. Further, the operations generated EBITDA of $187M and free cash flow of $143M. Once full synergies of the operations are achieved, Signify expects Cooper to deliver “adjusted EBITA margin in the low- to mid-teens.”