PITTSBURGH -- Westinghouse Electric Corp. said Wednesday that Eaton Corp. has agreed to acquire its Distribution and Control Business Unit for $1.1 billion plus assumption of certain liabilities.
The sale is part of the troubled industrial giant's previously announced strategy to sell off assets to raise funds.
DCBU, which makes electrical-distribution equipment and industrial controls, had 1992 sales of $1.1 billion. The sale also includes Challenger Electric, which Pittsburgh-based Westinghouse acquired in 1987.
DCBU employs some 12,500 people at 75 sites in the United States, Puerto Rico, Canada, Britain, Latin America.
Westinghouse fired its chief executive officer, Paul Lego, in January following several years of declining stock prices and huge losses that were run up mainly by Westinghouse Credit Corp.
Westinghouse stock, which had peaked at $36 in 1990, was off 25 cents to $15.75 a share on Wednesday on the New York Stock Exchange, while Eaton stock gained 75 cents to $45.375.
Westinghouse said Cleveland-based Eaton plans to merge DCBU into the suitor's Industrial Control & Power Distribution Operations, which markets Cutler-Hammer products. The Eaton operations have annual sales of about $500 million.
However, Westinghouse said the sale remains subject to both regulatory review and receipt of a waiver from Germany's Siemens A.G., which has right of first refusal for DCBU under a 1989 Westinghouse contract for circuit breakers.
Westinghouse said it has begun discussions with Siemens on the matter, adding Eaton has the right to terminate the deal if the German company does not grant a waiver within 30 days.
Following the announcement, Standard & Poor's rating agency said it had placed its single-A senior debt rating of Eaton on CreditWatch for a possible downgrade. It said about $720 million of debt is affected.
The agency said that while the deal is in line with Eaton's strategy of attaining leadership positions in its core businesses, the purchase will weaken Eaton's capital structure and cash flow protection measures.
On the positive side, S&P said combining DCBU, a leader in power distribution equipment, with Eaton's industrial control products will enable it to become a major player in the electrical control and distribution business and reduce its dependence on the cyclical automotive industry.
