Signify to acquire Cooper Lighting Solutions to strengthen its
position in the attractive North American lighting market
Press release
October 15, 2019
Signify to acquire Cooper Lighting Solutions to
strengthen its position in the attractive North American lighting
market
- Signify to acquire Cooper Lighting Solutions from Eaton for USD
1.4 billion in cash
- Clear strategic fit:
- Strengthening Signify’s market positions in North America, with
increased innovation power and more competitive offerings;
- Improving the business mix with Professional revenues
increasing from 42% to 53% of total sales1
- Respective agent networks and front office functions will
continue to operate independently
- Substantial value creation opportunity: cost synergy potential
with savings of more than USD 60 million per year, to be largely
achieved in the first three years
- Compelling financial metrics: mid-teens EPS accretion in year
1; transaction ROIC to exceed WACC after year 1
- Transaction fully funded with debt; committed bridge financing
in place
- Upon closing of the acquisition:
- Capital allocation priority is to deleverage. Strong free cash
flow expected to drive down the net leverage ratio from around 2x
at closing to below 1x net debt/EBITDA within three years
- Continue to pay a stable or increased dividend per share
Eindhoven, the Netherlands –
Signify, (Euronext: LIGHT), the world leader in lighting, today
announced that it has entered into a definitive agreement with
Eaton to acquire Cooper Lighting Solutions for USD 1.4 billion
(approx. EUR 1,270 million) in cash. Closing is subject to
regulatory approvals and other customary conditions and is expected
to take place in the first quarter of 2020.
Cooper Lighting Solutions, headquartered in
Peachtree City, GA, United States, is a leading provider of
professional lighting, lighting controls, and connected lighting.
The business offers a large breadth of products and applications,
both in the indoor and outdoor segments, sold under renowned brands
in North America including Corelite, Halo, McGraw-Edison, Metalux.
The company sells its lighting portfolio through a strong agent
network and has direct relationships with retailers, distributors
and other end-user customers. The business generated2 USD 1.7
billion of sales in 2018, of which 84% were LED-based, a reported
EBITDA of USD 187 million and free cash flow of USD 143
million.
“Today’s announcement confirms the strategic
importance of the North American market for Signify. This
acquisition will substantially strengthen our position in this
attractive market,” said Eric Rondolat, CEO of Signify. “We look
forward to welcoming the team from Cooper Lighting. They have built
a high-performance company based on professionalism, truly
innovative offers and a long and strong relationship with their
customers. We share a genuine passion and single focus for Lighting
and a successful track record in innovation. We will join forces to
further develop connected lighting and provide our customers with
the highest level of service while optimizing operational
efficiencies.”
A strategic transaction to strengthen
Signify’s position in the North American professional lighting
marketThis acquisition is fully in line with Signify’s
strategy to expand in attractive markets, enhancing Signify’s
position in the North American market and improving the business
mix.
Together, the two businesses will be better
positioned to benefit from the growing USD 12 billion professional
lighting market in North America, driven by the continued
conversion to LED and the increased demand for connected lighting
systems and controls.
Signify and Cooper Lighting will maintain
separate front offices: sales forces, agent networks, product and
brand portfolios, marketing and product development teams. Both
businesses will be able to strengthen their respective product
portfolios, benefitting from an increased power of innovation as
well as more competitive and cost-efficient offerings.
Substantial cost synergy potential of
more than USD 60 million per year The transaction is
expected to generate substantial cost synergies of more than USD 60
million per year, largely to be achieved in the first three years.
These tangible and well-identified cost synergies will stem from
savings in the bill of materials as well as from supply chain and
sourcing optimization.
Compelling financial
metricsSignify will acquire Cooper Lighting Solutions for
a cash consideration of USD 1.4 billion (approx. EUR 1,270 million)
on a cash and debt-free basis. The enterprise value of the
transaction net of the present value of tax benefits2 will be USD
1,313 million (approx. EUR 1,191 million), representing a multiple
of 7.0x the expected 2018 EBITDA excluding synergies, and 5.3x
including run-rate synergies.
The acquisition is expected to result in
mid-teens EPS accretion in year one and the transaction ROIC is
expected to exceed Signify’s WACC after year one.
Transaction impact on
SignifyUpon closing of the acquisition, Signify will
generate over 50% of its sales in the Professional segment,
increasing the revenue base for its growing profit engines from EUR
4.9 billion to EUR 6.4 billion. The proportion of sales generated
in the Americas increases from 28% to 40%. Once the full synergy
potential is achieved, Cooper Lighting is expected to deliver an
adjusted EBITA margin in the low- to mid-teens.
Financing StructureThe
acquisition is fully financed with debt, with committed bridge
financing arranged. Signify intends to replace the bridge loan and
the existing term loan debt obtained at IPO with a new financing
structure before or shortly after the closing of this
transaction.
Signify intends to maintain a robust capital
structure and continues to aim towards a financing structure that
is compatible with an investment grade profile. Following the
transaction, the company will prioritize deleveraging with strong
free cash flows expected to drive down the company’s net leverage
ratio from around 2x at closing to below 1x net debt/EBITDA within
three years. The company plans to continue to pay a stable to
increased dividend per share. While Signify will focus on
deleveraging, it will continue to invest in R&D and other
organic growth opportunities. As Signify will focus on integrating
Cooper Lighting and on delivering synergies, M&A will have a
lower priority.
1 Based on 2018 sales2 Based on audited carve-out financials,
excluding Specialty Lighting
--- END ---
Conference call and audio
webcastEric Rondolat (CEO) and Stéphane Rougeot (CFO) will
host a conference call for analysts and institutional investors at
8am CET on Wednesday 16 October to discuss the announced
transaction. A live audio webcast of the conference call will be
available via the Investor Relations website.
For further information, please contact:
Signify Investor Relations Robin Jansen Tel:
+31 6 1594 4569 E-mail: robin.j.jansen@signify.com
Signify Corporate Communications Elco van
Groningen Tel: +31 6 1086 5519 E-mail:
elco.van.groningen@signify.com
Signify Communications, The Americas Melissa
Kanter Tel: +1 917 848 3006 E-mail: melissa.kanter@signify.com
About Signify
Signify (Euronext: LIGHT) is the world leader in
lighting for professionals and consumers and lighting for the
Internet of Things. Our Philips products, Interact connected
lighting systems and data-enabled services, deliver business value
and transform life in homes, buildings and public spaces. With 2018
sales of EUR 6.4 billion, we have approximately 28,000 employees
and are present in over 70 countries. We unlock the extraordinary
potential of light for brighter lives and a better world. We have
been named Industry Leader in the Dow Jones Sustainability Index
for three years in a row. News from Signify is located at the
Newsroom, Twitter, LinkedIn and Instagram. Information for
investors can be found on the Investor Relations page.
Forward-looking statements This press
release contains certain forward-looking statements with respect to
the financial condition, results of operations and business of
Signify and certain of the plans and objectives of Signify with
respect to these items. Examples of forward-looking statements
include statements made about the strategy, estimates of sales
growth, future EBITA, future developments in Signify‘s organic
business and the completion of acquisitions and divestments. By
their nature, these statements involve risk and uncertainty because
they relate to future events and circumstances and there are many
factors that could cause actual results and developments to differ
materially from those expressed or implied by these statements.
Non-IFRS Financial MeasuresCertain parts of
this document contain non-IFRS financial measures and ratios, such
as adjusted EBITA, free cash flow, and other related ratios, which
are not recognized measures of financial performance or liquidity
under IFRS. The non-IFRS financial measures presented are measures
used by management to monitor the underlying performance of
Signify’s business and operations and, accordingly, they have not
been audited or reviewed. Not all companies calculate non-IFRS
financial measures in the same manner or on a consistent basis and
these measures and ratios may not be comparable to measures used by
other companies under the same or similar names. For further
information on non-IFRS financial measures, see “Chapter 18
Reconciliation of non-IFRS measures” in the Annual Report 2018.
Market Abuse Regulation
This is a public announcement by Signify N.V.
pursuant to section 17 paragraph 1 of the European Market Abuse
Regulation (596/2014).
- Signify to acquire Cooper Lighting Solutions to strengthen its
position in the attractive North American lighting market
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