Cooper to Acquire CCTV Maker - Analyst Blog

Cooper Industries plc (CBE) has entered into an agreement to acquire a Norwegian closed circuit television (CCTV) systems manufacturer Hernis Scan Systems AS. Hernis is a group company of Vislink plc. and specializes in making CCTV systems designed specially for onshore and offshore oil and gas, marine and petrochemical markets worldwide.

The completion of the acquisition is subject to receiving approval of  Vislink shareholders and other regulatory consents. After the completion of the transaction, Hernis will operate as a part of Cooper's Safety division.

The CCTV systems manufactured by Hernis are explosion-proof and capable of operating in difficult working conditions. Cooper is focused on enhancing its product portfolio suitable for explosion-proof harsh and hazardous environments, with Hernis being the fourth acquisition made by the company in the recent quarters. The worldwide CCTV market covered by Hernis will help Cooper to expand its global presence, especially in Europe and Asia.

On November 10, 2010, Cooper announced the acquisitions of two UK-based companies, Mount Engineering plc and Apex Lighting Controls Ltd. Mount Engineering is a manufacturer of specialty threaded adaptors and reducers for harsh and hazardous environments and Apex manufactures Energy Management lighting controls.

Cooper's strong balance sheet and a good acquisition strategy provide it with substantial growth opportunity. Though pressures in commercial markets is expected to be a continued drag on earnings during the year, numerous items such as lighting retrofit, government spending, energy efficiency projects and stimulus will help to buffer the underlying pressure. Residential markets appear to have bottomed out and should experience a modest growth. The company is well positioned to capitalize on the potential for renewed spending on transmission and distribution products as utilities begin to open up their spending again.

However, heightened global competition, given that Cooper expands its international exposure, can act as a negative catalyst for the company. Major competitors of the company are ABB Ltd. (ABB), General Electric Co. (GE) and Stanley Black & Decker Inc. (SWK). Operations and supply sources located outside the United States, particularly the emerging markets, are subject to increased risks. Operating entities outside the USA contributes significantly to the company's revenue and earnings.

Incorporated in Ireland, headquartered in Houston, Texas, Cooper Industries plc is a diversified manufacturer, marketer, and distributor of electrical products, tools, and hardware.  General industrial manufacturers, such as those in the aerospace and automobile industries, are the main users of Cooper's power tools and assembly systems.  Its brands include Buss, Edison, Crouse Hinds, Weller, DGD, Buckeye, Cooper, and Master Power.

We continue to maintain a Neutral rating on Cooper Industries for the long term. The company has a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.