Eaton Agrees to Buy Aeroquip-Vickers
Eaton offered a premium: $58 a share for a company whose stock closed Friday at $35.25. Aeroquip-Vickers stock climbed $20.75 a share to $56, about 59 percent, in heavy trading on the New York Stock Exchange Monday, while Eaton stock fell 4 percent to $66.82, a drop of $2.82.
The takeover is the largest ever for Eaton.
Directors of both companies have approved the deal, which is subject to a vote by Aeroquip-Vickers stockholders. The deal should be completed in April, Cleveland-based Eaton said.
Aeroquip-Vickers, which is based in the Toledo suburb of Maumee, includes Aeroquip Corp., which sold $1.1 billion worth of hoses and couplings last year, and hydraulics maker Vickers Inc., which had $1.1 billion in sales. It has 15,000 employees and 50 plants in 15 countries.
Darryl F. Allen, chairman of Aeroquip-Vickers, said the combined company would be a stronger competitor in the hydraulics and hose industry.
"It is clear that to successfully compete, a firm must supply complete product lines and global platforms," he said. "At $2.2 billion (in annual sales) Aeroquip-Vickers is too small to realize the full advantage of its strengths. Adding Aeroquip-Vickers to Eaton, however, creates an impressive force."
Eaton has 49,500 employees in 155 plants in 25 countries and 1998 sales of $6.6 billion. Its products include truck transmissions, electrical controls and engine components.
The takeover will help Eaton compete against industrial hydraulics leader Parker Hannifin Corp. of Cleveland, according to Kent Mortensen, vice president of Robert W. Baird & Co. Inc. in Milwaukee.
"They are still No. 2, but they’re a much more formidable competitor with a broader product line," Mortensen said.
As for the price, Mortensen said, "They paid up, but they paid for a market-leading position."
"The premium is high," Eaton chairman Stephen R. Hardis acknowledged, but added, "We thought their stock was undervalued. We think the value we got was very solid." Hardis said Eaton was getting "a global leader in industrial hydraulics."
Hardis said it was too early to say whether the acquisition would lead to layoffs. The takeover will yield annual savings of $120 million within five years, he said.
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