Eaton Corporation (ETN) has completed its proposed acquisition of Santiago-based Rolec Comercial e Industrial S.A. This transaction involves acquisition of all the shares of the Chilean firm.
Rolec Comercial e Industrial S.A. engages in manufacture of integrated power assemblies, and low and medium voltage switchgears. The company also provides engineering and mining services, and offers heavy industrial applications. Apart from Chile, the company has presence in Peru.
Currently, Eaton is on the verge of completion of its acquisition of Cooper Industries plc (CBE). Few days ago, the company received clearance-approvals related to this acquisition from the Competition Bureau of Canada, Korean Fair Trade Commission and the Turkish Competition Authority.
In July 2012, Eaton completed the acquisition of South Korean company Jeil Hydraulics, a manufacturer of track and swing drive motors, main control valves and remote control valves. This transaction is expected to bolster Eaton’s presence in the emerging markets while expanding its product coverage, with respect to its motor item segment.
As of June 30, 2012, Eaton had cash and short-term investments of $1.18 billion compared with $1.08 billion as of December 31, 2011. The company’s strong liquidity position enables it to pursue a steady inorganic growth approach.
It is evident from Eaton’s last few acquisitions that the company is diversifying its portfolio in terms of expansion of its line of businesses as well as global footprint, particularly in Europe, Middle-East, Africa, the Asia-Pacific region and now in Latin America. This acquisition will expand the company’s Latin American operations, further strengthening its existing base in Brazil and Mexico.
We have observed that Eaton has already experienced positive impacts associated with strong acquisition strategy in its second-quarter 2012 results. In the last couple of quarters, the company sealed some significant deals, which includes acquisition of E.A. Pedersen Company and IE Power, Inc. On the top of these acquisitions, the company’s sales of the Electrical Americas segment inched up 1% year over year. This segment also expects to report a strong performance in the second half of 2012. In addition, we believe that the decline in cost of goods sold and lower tax rate will likely benefit the company in the second half of 2012.
However, we are concerned about volatile currency market condition and slow economic growth rate in the emerging countries, which might have a negative impact on Eaton’s future results.
Eaton Corporation currently retains a short-term Zacks #3 Rank (Hold Rating).
Cleveland, Ohio-based Eaton Corporation offers an array of products, such as powertrain, truck and automotive systems, electrical components and systems, hydraulics and pneumatic systems for commercial and military use.
COOPER INDS PLC (CBE): Free Stock Analysis Report
EATON CORP (ETN): Free Stock Analysis Report
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