By Toby Sterling
AMSTERDAM (Reuters) - Signify (AS:LIGHT), the Dutch-based lighting company, has agreed to buy U.S. firm Cooper Lighting Solutions from Eaton (NYSE:ETN) Corp. [EATO.UL] for $1.4 billion in cash to boost its presence in North America.
Signify shares rose 4.6% to 25.00 euros in early trading in Amsterdam after the company said the deal would add to earnings per share in the first year and lead to cost savings of $60 million annually within three years.
The acquisition is the largest by Signify, the world's largest lighting maker that was formerly known as Philips Lighting, since it was spun off from Philips in 2016.
The deal aims to boost Signify's position in the global professional lighting market, where it is the No.2 player, and in North America, where it suffers from a lack of scale and competes with rivals like Acuity Brands Inc . (N:AYI), CFO Stephane Rougeot said.
"The rationale from a strategy standpoint is to get a much stronger market position in North America in professional," he said in a telephone interview.
"With Cooper we are getting a very large player in North America professional. They have great market positions, they have a large agent network, they have very deep customer relationships, they have great brands over there."
The deal is expected to close in the first quarter of 2020 pending regulatory approvals.
Peachtree City, Ga.-based Cooper Lighting Solutionst sells professional lighting and controls under the Corelite, Halo, McGraw-Edison and Metalux brands.
It reported 2018 sales of $1.7 billion and earnings before interest, taxes, depreciation and amortisation (EBITDA) of $187 million.
ING analyst Marc Hesselink, who rates Signify shares at "hold", said the deal was a "good strategic fit for Signify and price paid seems reasonable."
Still, Cooper would not add technology or new capabilities to Signify's portfolio and the deal would not really change the growth or margin profile of the company, he said.
Signify said it intends to keep dividends steady or increase them after the acquisition, but its main focus will be to reduce debt of the combined company from two times net debt to EBITDA to one time in the next three years.
During that time Signify will make further merger and acquisition activity less of a priority, Rougeot said.
Lazard advised Signify on the deal. Eaton was advised by Goldman Sachs (NYSE:GS).