DUBLIN—Power management company Eaton Corp. said late on Jan. 21 that it has agreed to sell its Hydraulics business to a Danish company, Danfoss A/S, for $3.3 billion in cash.
Dublin, Ireland-based Eaton said in a news release that the sale price of the Hydraulics business "represents a 13.2 multiple of 2019 EBITDA," which is earnings before interest, tax, depreciation and amortization. The transaction, subject to customary closing conditions and regulatory approvals, is expected to close by the end of the year.
Eaton also noted it will reatain its Filtration and Golf Grip businesses, which are reported in the company's Hydraulics segment.
Craig Arnold, Eaton's chairman and CEO, said the deal "is part of the ongoing transformation of Eaton into a higher-growth company with better earnings consistency. We believe this transaction will create substantial value for our shareholders and allow our hydraulics employees to be part of a company that has a strong commitment to the hydraulics industry."
The Hydraulics business, which makes hydraulics components, systems and services for industrial and mobile equipment, had sales of $2.2 billion in 2019. It also "accounted for 86 percent of Eaton's Hydraulics segment revenue in 2019," according to the release.
The business employs about 11,000 people.
Eaton said in the release that 2019 pre-tax income of $174 million for the Hydraulics business, plus depreciation of $58 million and amortization of $18 million, resulted in EBITDA of $250 million. The Filtration and Golf Grip businesses that are being retained had 2019 pre-tax income of $88 million, plus depreciation of $7 million and amortization of $6 million, resulting in EBITDA of $101 million.
More information on the Danfoss transaction will be offered in the company's quarterly conference call, set for Feb. 4.
Earlier this month, Eaton disclosed the sale of its Automotive Fluid Conveyance Division to private equity firm Quantum Capital Partners. Terms of that transaction were not disclosed. The division, part of Eaton's Vehicle Group, had sales of about $150 million in 2018.
Eaton unveiled plans to sell the division last March, saying it wanted to focus on higher-growth segments of the Vehicle Group business.
With reported sales of $21.6 billion in 2018, Eaton has about 101,000 employees and sells products to customers in more than 175 countries.