Danaher and Cooper Complete Tool JV - Analyst Blog

Danaher Corporation (DHR) and Cooper Industries Plc (CBE) have completed the joint venture of their tools businesses and financial reporting of the new entity will commence from the third quarter of 2010.

Both companies had announced their intention to merge their respective tools manufacturing businesses in March 2010 to generate substantial cost and revenue synergies. The combined turnover of the tools businesses was $1.2 billion in 2009. The areas where consolidation was sought were purchase function, geographical and sales channel expansion and cross-branding initiatives.

The two companies will have equal voting rights in the new entity, which is also expected to pay $90 million to Danaher in dividends.

Cooper Industries has several opportunities for additional growth in the current year, including stimulus spending, restructuring benefits and accretive capital allocation in the form of share repurchase or mergers and acquisitions. It will likely realize an outsized portion of its growth from developing markets in China, the Middle East and Mexico. Industrial, utility and energy markets are expected to rapidly expand, and industrializing economies will help offset some of the declines in the already developed regions. This will eventually help support higher growth rates for the current year.

Danaher Corporation is a diversified technology company designing, manufacturing, and marketing innovative products and services, which are typically characterized by strong brand names, proprietary technology and major market positions. From fire suppression systems and evacuation slide inflation to ejection seat subsystems and crew and passenger safety restraints, Danaher takes safety seriously and continues to enjoy a leading position in the aviation safety market.

Danaher organizes its business into four operating segments: The Professional Instrumentation segment encompasses two strategic platforms: Test & Measurement and Environmental. The Medical Technologies segment encompasses three key businesses: Dental Equipment and Consumables, Life Sciences, and Acute Care Diagnostics.

The Industrial Technologies segment encompasses two strategic platforms: Motion and Product Identification and three niche businesses; Aerospace and Defense, Power Quality, and Sensors and Controls.

The Tools & Components segment encompasses one strategic platform, Mechanics Hand Tools, and four focused niche businesses Jacobs Chuck, Delta Consolidated Industries, Hennessy Industries, and Jacobs Vehicle Systems.

We currently have a Neutral recommendation on Danaher Corporation and Cooper Industries.