Cooper Industries plc (CBE) has announced the acquisitions of three companies, Changzhou Yuhua Electrical Equipment Manufacturing Co. Ltd. (Yuhua); Blinda Industria e Comercio Ltda (Blinda); and GE’s Industrial Systems British Standard fuse-link product portfolio for a combined price of approximately $56 million. The three companies are expected to generate a combined sale of about $36 million in 2011.
Based in Changzhou, China, Yuhua has merged with Cooper Safety division. Yuhua specializes in the research, development, and production of explosion-proof CCTV systems and explosion-proof communication systems, which are licensed for use in onshore and offshore oil and gas, marine, mining, and petrochemical markets.
Blinda is a Campinas, Brazil based manufacturer of highly-specified explosion-proof products, such as lighting and panel boards for oil and gas markets in Brazil. The Cooper Crouse-Hinds division incorporates Blinda.
The British Standard fuse-link product portfolio from GE Industrial Systems will solidify worldwide the over-current circuit protection portfolio of Bussmann, while strengthening its business in India and Australia.
The acquisitions will enhance Cooper’s presence in the emerging markets through the addition of new techniques and expertise. A strong balance sheet well positions the company for further acquisitions.
The company is expected to realize an outsized portion of its growth from the developing markets in China, the Middle East and Mexico. Industrial, utility and energy markets are expected to rapidly expand and the industrializing economies will help to offset some of the declines in the already developed regions. This will eventually help to support higher growth rates for the current year.
However, heightened global competition, provided Cooper expands its international exposure, can act as a negative catalyst for the company. The company’s major competitors are ABB Ltd. (ABB), General Electric Co. (GE) and Stanley Black & Decker Inc. (SWK). Operations and supply sources located outside the United States, particularly the emerging markets, are subject to increased risks. Operating entities outside the USA contribute significantly to the company’s revenue and earnings.
Incorporated in Ireland and headquartered in Houston, Texas, Cooper Industries plc is a diversified manufacturer, marketer, and distributor of electrical products, tools, and hardware. General industrial manufacturers, such as those in the aerospace and automobile industries, are the main users of Cooper’s power tools and assembly systems. Its brands include Buss, Edison, Crouse Hinds, Weller, DGD, Buckeye, Cooper, and Master Power.
We continue to maintain a Neutral rating on Cooper Industries, with a Zacks #2 Rank (Buy recommendation) over the next one-to-three months.
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