Signify is buying Cooper Lighting Solutions from Eaton for $1.4 billion in cash. The move is intended to strengthen Signify’s market positions in North America “with increased innovation power and more competitive offerings”.
The announcement confirms the strategic importance of the North American market for Signify, said Signify CEO Eric Rondolat; “this acquisition will substantially strengthen our position in this attractive market”.
Once the acquisition is complete, Signify will have increased the proportion of its sales generated in the Americas from 28 percent to 40 percent.
At the same time it should improve the business mix at Signify, with revenues from Professional sales increasing from 42 percent to 53 percent of total sales on 2018 figures. The consumer segment has been volatile recently, with downward price pressures making life difficult for businesses with too much exposure.
There’s also the opportunity to cut costs across the newly enlarged enterprise, with savings in the first three years estimated at more than $60 million per year.
There is no intention of asset stripping, however. “We look forward to welcoming the team from Cooper Lighting,” said Eric Rondolat. “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 optimising operational efficiencies.”
Signify and Cooper Lighting will maintain separate front offices: sales forces, agent networks, product and brand portfolios, and marketing and product development teams. Both businesses will be able to strengthen their respective product portfolios, said Signify.
Cooper Lighting Solutions generated $1.7 billion of sales in 2018, with EBITDA of $187 million. That implies Signify is paying a multiple of nearly 7 times earnings after tax benefits and “excluding run-rate synergies”.
The deal is subject to the usual regulatory approvals and other conditions and is expected to take place in the first quarter of 2020.