Danfoss Acquires Eaton’s Hydraulics Unit

Amalgamation of two European industrial giants creates potential powerhouse

In an amalgamation of two European industrial mammoths, power management company Eaton announced in a press release January 21 it has entered into an agreement to sell its hydraulics business to Danfoss A/S, the Danish industrial company, for $3.3 billion in cash. The deal combining Dublin-based Eaton and Nordberg’s Danfoss creates a potential powerhouse in both the continental market and the increasingly-prominent hydraulics sector. The release from Eaton stated the agreement represents a 13.2 multiple of 2019 EBITDA.

 

Eaton’s hydraulics business is one of its most productive; accounting for 86 percent of Eaton’s hydraulics segment revenue in 2019. The branch produces hydraulics components, systems, and services for industrial and mobile equipment. It had sales of $2.2 billion in 2019 and employs approximately 11,000 people worldwide. An important note: Eaton is retaining the filtration and golf grip businesses currently reported in the company’s hydraulics segment.

Regarding effects on the workforce, readers should be encouraged to hear that no job cuts or relocating are expected at this time. “Eaton’s hydraulics employees will become Danfoss employees following the completion of the sale,” Margaret Hagan, communications manager for Eaton, told Electrical Apparatus via e-mail Wednesday.

EatonDanfoss

Eaton sold its hydraulics business to Danfoss on Tuesday for $3.3 billion.—Eaton/Danfoss image

“Today’s announcement is part of the ongoing transformation of Eaton into a higher growth company with better earnings consistency,” said Craig Arnold, Eaton chairman and chief executive officer. “We believe this transaction will create substantial value for our shareholders and allow our hydraulics employees to be part of a company that has a strong commitment to the hydraulics industry.”

For Danfoss, the move appears to signify an important checkpoint in the company’s roadmap and its prospects for the future. The acquisition “marks a major milestone in the company’s history and its ‘Going Great’ strategy,” it said.

“Today, we take a significant and transformational step in creating a global leader in mobile and industrial hydraulics,” Kim Fausing, Danfoss President and CEO, remarked in Danfoss’ own news release Wednesday. “It is a once-in-a-lifetime opportunity to combine our largely complementary portfolios and geographic footprints. Eaton Hydraulics is a highly respected player in the global industry, recognized for its dedicated people and strong brands. By combining the knowledge and experience of the two businesses, our customers will benefit from unmatched expertise from a single partner. With this agreement, we continue to invest in our core hydraulics business and digital solutions to stay a strong technology partner.”

The transaction is subject to customary closing conditions and regulatory approvals and is expected to close by the end of the year.

More information on the transaction will be provided during Eaton’s quarterly conference call on February 4, 2020, at 11 a.m. Eastern time. Interested parties can access the live audio webcast via a link on Eaton’s home page. A replay will also be available following the call.

Eaton recorded 2018 sales of $21.6 billion. With a breadth of services and businesses, the company provides energy efficient solutions that aim to help customers manage electrical, hydraulic and mechanical power more efficiently, safely and sustainably. Eaton has approximately 101,000 employees and sells products to customers in more than 175 countries.

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