BEACHWOOD, Ohio—Power management giant Eaton Corp. P.L.C. plans to spin off its lighting business into an independent, publicly traded company.
The business, which makes LED lighting and controls, has annual sales of about $1.7 billion. Eaton said in last week's announcement that it hopes to complete the spinoff by the end of 2019.
Also on Friday, the company held its annual investors conference, and presentation materials posted on Eaton's website add a little more insight into what the company's doing.
For instance, Eaton said the spinoff "plan(s) to domicile in Ireland," just as Eaton itself is based there for tax purposes, with North America headquarters in Beachwood. The lighting business would have U.S. offices in Atlanta, and it would boast about 5,000 employees worldwide, Eaton said in the material for investors. It describes the business as "a leading global provider of LED lighting solutions" with "an extensive product portfolio" and a "differentiated sales network with market-leading relationships." Growth in the lighting unit is "driven by increases in connected and intelligent solutions, along with growing complexity and technical requirements."
In a section marked "rationale" for the spinoff, Eaton provided two bullet points:
- "Ability for Lighting to prioritize and fund its growth initiatives."
- "Margin performance is dilutive."
Richard Fearon, Eaton's chief financial officer, in his presentation noted that the $1.7 billion of lighting unit sales would be divested from Eaton's Electrical Products segment, but that "remaining Electrical business (is) expected be higher growth" and "Electrical Products segment margin (is) expected to increase by about 150 (basis points) -200 bps at maturity."
Along with the spinoff, Eaton told investors that it plans to sell its Automotive Fluid Conveyance business by the end of 2019. That business, part of Eaton's Vehicle Group, has about $150 million in annual sales. Similar to the rationale for the lighting spinoff, Fearon noted that "remaining Vehicle business (is) expected to be higher growth" and that the Vehicle Group segment margin is "expected to increase by about 100 bps."
Goldman Sachs is serving as the company's financial adviser on the lighting unit spinoff. Eaton employs 99,000 people worldwide and sells products to customers in more than 175 countries. Its sales last year were nearly $22 billion.