Power management company Eaton Corp. said Tuesday that it finalized a deal to acquire Royal Power Solutions for $600 million in a bid to expand its electric vehicle supply chain business.
Royal Power Solutions is an electric connectivity components company whose parts are used primarily in EVs. The acquisition will allow Eaton's eMobility team to expand its reach into that $11 billion market, said Joao Faria, president of Eaton's vehicle group unit.
"This is a big opportunity for us and then bring a bigger portfolio and a bigger market that we can attend to," he said.
The price paid is more than 13 times Royal Power Solutions estimated earnings before interest in 2022, Eaton said in a statement.
Royal Power Solutions works with many of same manufacturing customers as Eaton, Faria said.
Royal Power Solutions employs about 450 people and operates two manufacturing facilities, located in Carol Stream, Ill., and Queretaro, Mexico. The company also has a sales and engineering department located near Detroit in Canton, Mich.
Eaton does not plan to reorganize the company but instead will just look to expand further into the markets in which Royal Power Solutions operates. Eaton will look to use its connectivity technology in the aerospace sector and data centers as well, Faria said.
"The addition of Royal Power Solutions enhances our ability to capitalize on this secular growth trend across our eMobility, aerospace and electrical businesses," Heath Monesmith, COO of Eaton's industrial sector unit, said in the statement.