Eaton Mobility to merge with Dana, creating $11B supplier

The leaders of Dana Inc. and Eaton Corp. have agreed to merge the latter’s $3.3 billion mobility business into Dana and create a driveline and powertrain business with 28 factories and some 13,000 employees around the world.

Word of the deal to combine Eaton Mobility with Dana—which will be the surviving company and have annual sales of about $11 billion, nearly 30% of which will come from commercial vehicles—comes nearly five months after Eaton CEO Paulo Ruiz and his team said they intended to spin off Eaton Mobility into its own publicly traded company. Eaton has been increasingly focused on growing its electrical and aerospace businesses and taking advantage of spending booms in the data center, aviation and defense sectors.

“By expanding our presence in core markets with new products and complementary technologies, we are enhancing our ability to deliver greater value to customers while strengthening margins through a more balanced portfolio and meaningful synergies,” Byron Foster, who will take over as Dana CEO on July 1, said in a statement. “Importantly, we are bringing together highly skilled and dedicated teams whose expertise will drive our future success.”

Foster and CFO Timothy Kraus told investors that joining forces with the more profitable Eaton Mobility group will put Dana on a path to grow sales to between $14 billion and $15 billion by 2030 while producing EBITDA margins of about 18%. Today, Dana’s 2030 goals are to grow revenues from $7.5 billion to $10 billion while producing adjusted EBITDA margins of 14% to 15%. On a conference call with analysts June 11, executives said cross-selling products will be key to hitting those targets.

As part of the transaction, which will have each company’s shareholders own roughly 50% of the larger Dana, Eaton will be paid $1.1 billion in cash. The deal is expected to close early next year and executives expect that they’ll be able to generate $250 million in cost savings in the two years after, in part by adding automation elements to Eaton’s plants.

On the conference call, outgoing Dana CEO Bruce McDonald said his team had “long coveted” Eaton Mobility and added that combining Dana’s driveline and electrification business with Eaton’s expertise in transmissions will create a company that is “truly differentiated.” Today, nearly 70% of Dana’s business comes from the light-vehicle market while 20% of sales are to commercial-vehicle customers. At the combined organization, those shares will be 58% and 27%, respectively, with aftermarket sales making up 16% of the company’s top line.

The new Dana will run 14 manufacturing sites in North America, five of them focused on commercial vehicles, as well as four plants in both Brazil and Europe and five factories in the Asia-Pacific region.

Dana investors didn’t love the look of the Eaton deal at first glance. In afternoon trading June 11, Dana shares (Ticker: DAN) were down more than 13% to $30.70 on heavy volume. Eaton stock (Ticker: ETN) was up about 4%.