Cooper reveals higher assessment with Tyco at stake: M & A Real

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April 19, 2011, 10:48 PM EDT By Will Daley and Rachel Layne

April 20 (Bloomberg) -- Cooper Industries Plc, the maker of electrical distribution equipment with a valuation 52 percent greater than Tyco International Ltd., is looking more like the target that proves you get what you pay for.

Cooper, a takeover candidate according to Citigroup Inc. and Vertical Research Partners LLC, is valued at 13.3 times earnings before interest, taxes, depreciation and amortization, more expensive than Tyco at 8.74 times, according to data compiled by Bloomberg. Cooper also trades at the third-highest price relative to free cash flow for a diversified manufacturer with a market value greater than $5 billion, the data show.

A focus on smart-grid components, LED lighting and energy- efficient technology makes Cooper attractive for Schneider Electric SA, which said last week it’s “not currently” in talks to buy Tyco, as well as Siemens AG, Johnson Controls Inc. or ABB Ltd., said Citigroup’s Deane Dray. The almost $11 billion company will benefit from North American and European utilities upgrading to smart grids that better manage power usage and emerging economies building new infrastructure. Cooper was one of more than 40 companies Bloomberg identified last month as fitting Warren Buffett’s acquisition criteria.

“I’m not surprised that it would be a potential target for any number of these big multinationals,” said Andrew Baumbusch, a Denver-based fund manager with Cambiar Investors LLC, which oversees about $8 billion and owns almost 2.2 million Cooper shares. “Cooper’s a very well-run entity. The current management has done a fantastic job at getting the company exposed to longer-term growth areas of the market.”

Enterprise Value

The firm’s $1.6 billion Cambiar Opportunity Fund in the past year has beaten 96 percent of rival funds.

Dan Swenson, a spokesman for Cooper, which is incorporated in Dublin with administrative headquarters in Houston, didn’t respond to a phone call and e-mail seeking comment.

Anthime Caprioli, a spokesman for Schneider; Alexander Becker with Munich-based Siemens; Thomas Schmidt for Zurich- based ABB; and Paul Mason at Johnson Controls; declined to comment on market rumors.

With debt and equity of $11.1 billion, Cooper is worth 13.3 times its Ebitda in the past 12 months, data compiled by Bloomberg show. That’s 52 percent higher than Tyco, owner of the security-monitoring firm ADT, and above the median 10 times for diversified manufacturers with market values greater than $5 billion, the data show.

‘Bit Expensive’

Cooper closed at $65.39 yesterday, which is 22 times the free cash flow generated per share in the past 12 months, higher than 17 of 20 large diversified manufacturers, the data show.

“Cooper may look a bit expensive,” said Jack Ablin, chief investment officer at Chicago-based Harris Private Bank, which oversees $60 billion. “Still, it’s a high-quality company. It would be a great fit for a lot of global companies. Energy efficiency and alternative energy are huge growth areas that the world certainly needs.”

Cooper, Lubrizol Corp. and Falls Church, Virginia-based General Dynamics Corp. were among companies identified by Bloomberg last month as fitting the acquisition criteria listed in the annual letter to shareholders from Buffett, the 80-year- old billionaire investor and chairman of Berkshire Hathaway Inc. Two weeks later, Omaha, Nebraska-based Berkshire said it agreed to pay about $9 billion for Lubrizol of Wickliffe, Ohio.

Buffett said in the letter that he typically prefers “simple” businesses with pretax profit exceeding $75 million, “consistent” earning power, and “good” returns on equity while employing little or no debt.

Buffett didn’t respond to a request for comment e-mailed to his assistant, Carrie Kizer.

Schneider-Tyco

Schneider, the French maker of electrical components, was considering a takeover of Schaffhausen, Switzerland-based Tyco, Bloomberg reported April 11, citing three people with knowledge of the matter who spoke on condition of anonymity because the discussions were private. Schneider shares fell 11 percent in the next six days.

“The pressure has been building for M&A in this space for two years, and not much is getting done,” said Jeffrey Sprague, a Vertical analyst in Stamford, Connecticut. “This could blow things open.”

Cooper would be a “more obvious” fit for Rueil-Malmaison, France-based Schneider, said Sprague, who was the top-ranked multi-industry analyst by Institutional Investor for a decade until he left Citigroup a year ago to co-found Vertical.

Energy-Efficiency Market

Schneider, which specializes in energy management, would be interested in Cooper to boost its presence in the energy- efficiency market, according to Julian Mitchell, a New York- based analyst with Credit Suisse Group AG. While Cooper’s work with utility power and lighting would also fit with Schneider’s recent acquisitions and building-management business, respectively, a deal is unlikely because of the size, Mitchell said in an April 4 note.

Of Cooper’s $5.1 billion in revenue last year, about 65 percent came from the U.S. That presence may make it appealing to a large European industrial company such as Schneider, ABB or Siemens, according to Dray, an analyst with Citigroup in New York. Johnson Controls in Milwaukee may be another potential suitor if the company decides to branch outside of building controls, automotive components and batteries, he said.

“There are probably five or six companies that are able to look at Cooper to buy,” said Joel Levington, managing director of corporate credit research at Brookfield Investment Management Inc. in New York. “They’re well-positioned within electrical equipment product lines. They make products that will be around for a lot of long-term trends.”

Electricity Consumption

U.S. electricity consumption is projected to rise 0.2 percent in 2011 and 2.3 percent in 2012, according to the U.S. Energy Department’s Short-Term Energy Outlook published this month. Utilities in the U.S. will spend about $5.5 billion this year on smart grids, while European utilities will shell out about $1.3 billion, according to Albert Cheung, a Bloomberg New Energy Finance analyst in London. China has said it will invest up to $660 billion through 2020 to upgrade its national grid.

The Paris-based International Energy Agency last year estimated that $33 trillion of energy infrastructure investment is needed by 2035 if countries are to meet their international commitments to limit greenhouse gases.

“If there’s a thought that quality over time can trump the price side, then you’ll likely get what you pay for,” said James Dunigan, chief investment officer in Philadelphia for PNC Wealth Management, which oversees $108 billion.

Industry Deals

Cooper has climbed 12 percent this year, to as high as $69.76 on April 1, according to data compiled by Bloomberg. It had a market value of $10.8 billion as of yesterday.

Digesting a company of this size would mean completing one of the largest takeovers of its kind. The biggest multi-industry manufacturing deal was Veba AG’s $15 billion merger in 2000 with Viag AG to form Germany’s largest utility, Duesseldorf, Germany- based E.ON AG, data compiled by Bloomberg show.

Cooper, founded in 1833 by the Cooper brothers, transformed itself into a focused electrical-equipment company a year ago when it agreed to combine its tool operations, including Crescent wrenches and Lufkin tape measures, in a joint venture with Washington-based Danaher Corp. That made it more appealing to acquirers who no longer have to deal with an unrelated, “low- growth” business, Citigroup’s Dray said.

Kirk Hachigian, 51, who became Cooper’s chief executive officer in 2005, said at a March 1 analyst conference that the company is now “100 percent electrical” and serves markets with $140 billion in sales.

“We have the cycle and the wind in our sails for the next several years,” Hachigian told investors.

Building Cash

Cooper almost tripled its cash and equivalents to $1.04 billion last year. Hachigian said at the analyst meeting that the company is pursuing “mid-size to larger acquisitions.”

“Cooper’s talked about wanting to be a consolidator, to be an acquirer, but as yet in the last couple of years they’ve not been able to put the balance sheet to work from a real scale perspective,” Cambiar’s Baumbusch said. “To some degree that strong balance sheet becomes a bit of a liability to the extent they want to stay independent.”

Overall, there have been 7,384 deals announced globally this year, totaling $715.9 billion, a 29 percent increase from the $553.3 billion in the same period in 2010, according to data compiled by Bloomberg.

--With assistance from Zachary R. Mider, Michael Tsang, Tara Lachapelle, Andrew Frye and Christopher Martin in New York, Rita Nazareth in Sao Paulo and Jacqueline Simmons in Paris. Editors: Sarah Rabil, Daniel Hauck.

To contact the reporters on this story: Will Daley in New York at wdaley2@bloomberg.net; Rachel Layne in Boston at rlayne@bloomberg.net.

To contact the editors responsible for this story: Daniel Hauck at dhauck1@bloomberg.net; Katherine Snyder at ksnyder@bloomberg.net; Ed Dufner at edufner@bloomberg.net.

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Obama said on the call to duty reductions, higher taxes

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April 12, 2011, 6: 16 PM EDT By Julianna Goldman and Roger Runningen

(Updates with Boehner statement in eighth paragraph.)

April 12 (Bloomberg) — President Barack Obama will call tomorrow for reductions in entitlement spending and tax increases on higher-income Americans to address the nation's long-term debt while drawing a sharp contrast with a Republican proposal by Representative Paul Ryan, according to a person familiar with the plan.Obama's approach will draw on the findings of the Simpson - Bowles debt commission chairmen, who said tax increases had to accompany spending cuts. He will specifically reject Ryan's idea of a voucher-like system for future Medicare recipients, the person said.The president also will try to align his plan with the objective of the so-called Gang of Six, a group of three Republican and three Democratic senators working on their own tax recommendations. Plan that isn't expected to be released until after a two-week congressional recess scheduled to begin next week, according to people familiar with the negotiations.Obama's address on the federal debt, to be delivered tomorrow afternoon at George Washington University in the capital, comes as he is preparing for a fight with congressional Republicans over raising the government's debt limit and trying to set the debate for the 2012 presidential campaign."while refusing to release details about what the president will say, white house officials have offered hints of the direction he will take.""You can't simply slash entitlements, lower taxes and call that a fair deal," Obama's spokesman, Jay Carney, said yesterday.Briefing LawmakersThe planned to brief president bipartisan congressional leaders at the White House tomorrow, before the speech. Those expected to expected, according to the White House, include House Speaker John Boehner, Republican of Ohio; U.S. representative Nancy Pelosi, Democrat of California. Eric Cantor, Republican of Virginia; Steny Hoyer, Democrat of Maryland; Senate Democratic Leader Harry Reid of Nevada, Senate Republican leader Mitch McConnell of Kentucky and Senators Dick Durbin, Democrat of Illinois, and Senator Jon Kyl, Republican of Arizona.Signaling the political challenge for the president, Boehner said in a statement anticipation of Obama's speech that "tax increases are unacceptable and are a non-starter."Themes in BudgetMany of Obama's themes will reflect those contained in his Feb. 14 budget plan for fiscal 2012, including letting income tax rates for married couples making more than $250,000 or individuals earning above $200,000 rise 39.6 percent from 35 percent when the current rates expires. He also wants to close loopholes in the tax code.The presidential commission recommendations that Obama will draw upon was headed by former Senator Alan Simpson, a Wyoming Republican, and former Clinton administration official Erskine Bowles, a Democrat.While Obama's budget forecast cutting the deficit by $1.1 trillion over a decade, the commission's plan would cut almost $4 trillion over the period. Both used a combination of spending cuts and higher revenue. Ryan's plan would cut the deficit by $4.4 trillion over 10 years, primarily through deep cuts in federal spending. Ryan, of Wisconsin, proposes to reduce top income and corporate tax rates from 35 percent to 25 percent.Over the next five years, the government is forecast to stack up a cumulative deficit of $3.8 trillion. over the decade, the cumulative deficits would rise to $7.2 trillion, according to the president's budget.EntitlementsAlong with taxes, Obama is setting up a fight over entitlements. Ryan would phase out the traditional Medicare program for the elderly and replace it with subsidies to buy private insurance. It would cap spending on Medicaid, the health-care plan for the poor.Obama will address some specific changes to Medicare tomorrow, using some of the recommendations in the Bowles - Simpson plan as a template, according to one person familiar with White House talks.The commission recommended that the Health and Human Services Department expand accountable care organizations that reward doctors based on performance as quickly as possible and use a new payment formula for physicians.All Issues "The tax commission showed that you need to look at entitlements, you need to look at tax expenditures, you need to look at military spending," Carney said. "you need to look at all of these issues."For all the concern about the deficit in Washington, in the bond market, yields in the U.S. are lower now than when the government was running a budget surplus a decade ago even though Treasury Department data show that the amount of marketable debt outstanding has risen to $9.13 trillion from $4.34 trillion in mid-2007.The yield on the benchmark 10-year Treasury note was at 3.53 percent today, below the average of 7 percent since 1980 and compared with the average of 5.48 percent in the 1998 through 2001 period, according to Bloomberg Bond Trader prices.Carney said the administration wants to keep the debate over long-term deficits separate from the coming vote on raising the federal debt limit. "We don't believe there is a relationship between the two," he said.The government is projected to hit the $14.3 trillion legal cap on government borrowing by May 16, according to the Treasury Department.Seeking InitiativeObama is seeking to gain the initiative on the deficit outcome following the release of Ryan's plan and an agreement with congressional Republicans on cuts for the current fiscal year that cleared the way for approval of a 2011 budget.Honeywell International Inc. Chief Executive David Cote, a member of the president's debt commission, said he would like to see the administration come up with a long-term plan that cuts at least $4 trillion from the deficit over 10 years."Rating, who declined to say whether he has consulted the White House on Obama's speech, also commended Ryan for focusing attention on the long-term deficit.""I applaud Paul Ryan putting his plan out there." Rating said. "" I think he is the one guy who has really demonstrated guts here in getting out there and being willing to be a lightning rod and attract complaints. """The president really stood up in establishing the tax commission," Cote said. "But I have to say, when it comes to somebody putting forward a plan, Paul Ryan did that first.""Driving the DebateAndy Stern, former head of the Service Employees International Union who also was a member of the debt panel, said that Republicans have been driving the debate on the deficit."I would have certainly preferred that this debate began on Dec. "1 with the president's leadership when the commission actually reported, that his budget would have been a follow-up, and we could have avoided the Republicans being seen as driving this debate," Stern said in an interview.Stern, who hasn can't consulted with the administration before tomorrow's speech, said he doesn't expect the president to offer a deeply detailed proposal for lawmakers to consider. "Any legislation will still need to be crafted in the halls of Congress, he said.""I don't think you need a full-scale budget," Stern said. "people need to understand what is the framework."

-With assistance from Heidi Przybyla, Julie Hirschfeld Davis and Laura Litvan in Washington. Editor: Joe Sobczyk, Robin Meszoly

To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net. Julianna Goldman in Washington at Jgoldman6@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.

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Slightly higher radiation in Ontario

In photo, Minister of energy of the Ontario Brad Duguid a ceremony of inauguration of the completion of the solar project Sarnia in Sarnia, Ontario, last October. Dave Chidley/Canadian Press

Higher than normal levels of radiation were detected in Ontario after the nuclear crisis at the Japan, but officials said Tuesday that the increase is so low that it poses a risk to health.

Energy Minister Brad Duguid said levels increased slightly, but he did not detail specific on the question of whether the increases were found in water, air or food.

"There is some some minor increase in radiation detection, but is not anywhere near something which would have an impact on human health," Duguid said to journalists. "This is not something that Ontario residents need to be too concerned about."

The news comes a day after the Japan has increased the rating of the severity of the crisis in the ravaged Central Fukushima Daiichi nuclear tsunami at the same level as the Chernobyl disaster.

Office of the Minister of energy distributed on some radiation that may "have been organized by the wind" of the Japan in this country and normal background of the Canadian Commission for the nuclear safety and Health Canada information.

"Natural radiation varies from one place to another, but Health Canada data do not show an increase over normal daily fluctuations," said the safety Committee.

"However, very careful of isotopes in the radiation levels have been attributed to the output to the Japan."

The actual increase of radiation "is so low that it is extremely difficult to measure against the normal background radiation, said the commission." "" The conclusions of these detectors more confirm that radiation doses do not present a risk to health for Canadians. ?

Medical officer of Health Dr. Arlene King, Ontario of health Chief, said all the products imported and domestic, tested by the Federal Government are below levels of Health Canada action to harmful radiation.

"Based on current information, I am of the opinion that there is no risk to the health of Ontarians and Ontario of the damaged nuclear installation at the Japan", King said in a statement.

Ontario's Environment Minister John Wilkinson said that there is no problem of radiation with drinking water in the province.

"Ontario's water is safe, but given the situation in the Japan we use increased vigilance," said.

Agriculture Minister Carol Mitchell said it belonged to the Canadian Food Inspection Agency to determine if there were any radiation in food or milk sold in Ontario.

"All milk that is sold in Ontario is sterilized, pasteurized," said Mitchell.

The Ontario new Democratic Party, said that they could not believe that the provincial Government therefore knows little about the radiation levels one month full after the beginning of the nuclear crisis in the Japan.

"This is quite disconcerting," said NDP Leader Andrea Horwath. "The people of this province just want to know that their water is safe, that their food is safe, their milk and it is quite amazing that we could get the answers from the Government today.".

The NDP noted that high levels of radiation already have been reported in several cities in the U.S. is, including in Vermont, Arkansas, California and Arizona milk and water in New Jersey, PennsylvaniaIdaho and the Tennessee.

"It is clear ongoing monitoring in other jurisdictions," said Horwath. "If they are testing and let people know what is happening, Ontario residents should expect nothing less."

Records of the Canadian Press return to the accessibility links

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