Cooper Industries plc (CBE) announced the takeover of Germantown , MD -based Eka Systems, Inc., a provider of secure, reliable and adaptive RF wireless networking technologies for smart grid communication applications. Financial details and other terms of the transaction are not available in public domain.
Eka Systems, through its EkaNetTM Smart Network technology, provides utilities with an open-standards based wireless Advanced Metering Infrastructure (AMI) having capabilities of automated meter reading, power outage detection, enhanced customer billing options and tracking and analyzing usage data on a real-time basis. Eka Systems’ product offering includes radios, wireless repeaters, meter nodes, gateways and data collection tools and operates over the widely used 900MHz frequency for domestic markets and the 2.4GHz frequency for international markets.
Eka Systems will be integrated into the EAS group, the smart grid platform within Cooper’s Power Systems division. This is the fourth acquisition the company has made in its Energy Automation Solutions (EAS) business.
Cooper has several opportunities for additional growth in the current year, including stimulus spending, restructuring benefits and accretive capital allocation in the form of share repurchases or mergers and acquisitions. If Congress decides to retroactively reverse tax inversion legislation, CBE’s tax rate would be higher than expected, which will affect earnings. While earnings risk still remains, we believe that the previous year marked the bottom for the earnings cycle.
CBE 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 already developed regions. This will eventually help support higher growth rates for the current year.
Pressures in commercial markets will continue to be a drag on earnings throughout the current year; however, numerous items such as lighting retrofit, government spending, energy efficiency projects and stimulus will help buffer underlying pressure. Residential markets appear to have bottomed out and should experience modest growth. The company is well positioned to capitalize on the potential for renewed spending on transmission and distribution products as utilities begin to open up their spending again.
Cooper Industries, Ltd. is a global manufacturer, with 2009 revenues of $5.1 billion, approximately 89% of which were from electrical products. Cooper has manufacturing facilities in 23 countries and currently employs approximately 28,200 people.
We currently have a Neutral recommendation on CBE.
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