Eaton to sell Engineered Fasteners and Fluid Power Divisions
CLEVELAND, OHIO.... Eaton Corporation (NYSE:ETN) today said it will sell the company’s Engineered Fasteners and Fluid Power Divisions to offset, in part, the cost of the impending acquisition of Aeroquip-Vickers, Inc.
Engineered Fasteners, which is based in Brunswick, Ohio, and has approximately 650 employees, had 1998 sales of $94 million, while the Marshall, Michigan-based Fluid Power Division has approximately 1,050 employees and had 1998 sales of $189 million.
Stephen R. Hardis, Eaton Chairman and Chief Executive Officer said, "With the impending acquisition of Aeroquip-Vickers for $1.7 billion, Eaton has a number of options available to it in order to finance the transaction. We are issuing debt, and we can, of course, finance the balance by issuing more Eaton shares. We may do that, too, but for some time we have felt that Eaton’s stock has been undervalued, and equity financing is therefore very expensive. By selling the fasteners and fluid power businesses and applying the proceeds to the Aeroquip-Vickers purchase, we can minimize the number of common shares that we issue, and thereby limit earnings per share dilution. The decision to divest these strong businesses reflects our confidence in Eaton’s future earnings.
"Increasingly, the automotive industry is consolidating its supplier base, and expecting those suppliers to apply a more modular approach to the products they bring to the marketplace. As currently structured, neither our fastener nor our fluid power business have this capability, and it would require significant investments or additional acquisitions to grow these operations to that level.
"Both the fastener and fluid power businesses have excellent work forces and leadership teams, which makes this decision particularly difficult, but in the final analysis, we believe this course of action is in the best interest of our owners."
Sale of the Engineered Fasteners business will be handled by the investment banking firm of Bowles Hollowell Conner, a division of First Union Capital Markets Corp., while the Fluid Power transaction will be handled by Goldman, Sachs & Co. Eaton said it would not speculate on the sale price it might receive for the two businesses.
Eaton’s Engineered Fastener Division manufactures a wide variety of fastening devices for a number of applications, including the automotive, business equipment, consumer electronics and home appliance markets. The division has manufacturing facilities in Brunswick and Massillon, Ohio, and in Hamilton, Ontario, Canada.
The Fluid Power Division produces engine cooling viscous fan drives for automobiles, and light to heavy trucks. The division has manufacturing facilities in Fletcher, North Carolina, Markdorf, Germany and San Jose dos Campos, Brazil, as well as a joint venture business in Ningbo, China.
On February 1, 1999, Eaton announced that it intended to acquire Maumee, Ohio-based Aeroquip-Vickers, a $2.1 billion world leader in the design, manufacture and distribution of engineered components and systems to industrial, aerospace and automotive markets. Eaton expects the transaction to be concluded early next month.
Eaton Corporation is a global manufacturer of highly engineered products that serve industrial, vehicle, construction, commercial and semiconductor markets. Principal products include electrical power distribution and control equipment, truck drivetrain systems, engine components, hydraulic products, ion implanters and a wide variety of controls. Headquartered in Cleveland, the company has 49,500 employees and 155 manufacturing sites in 25 countries around the world. Sales for 1998 were $6.6 billion.