The new deal with Eaton gives investors exactly what they wanted: a leaner company with greater exposure to the AI data center boom. Auto parts maker Dana has agreed to merge with Eaton’s lagging mobility business, valuing the unit at $5.1 billion, the companies announced Thursday. The move not only removes the drag on Eaton’s profit growth, but also positions the company to benefit from the high-margin business of helping build data centers. At Thursday’s morning meeting, Jim Cramer said this was just the latest example of the conglomerate “doing everything right.” The deal is expected to close in the first quarter of 2027 and should boost Eaton’s organic growth. Combining Dana and Eaton’s mobility divisions will create a more comprehensive vehicle technology supplier valued at approximately $10 billion. Both businesses develop technology to manage the flow of electrical power through vehicle propulsion systems. Thursday’s news brings Eaton one step closer to fulfilling its pledge to sell its mobility division. The company announced its intention to exit the business in January, but until now it was unclear how exactly that would be accomplished. This is a wise move by management. We have seen this decision as “addition and subtraction.” Exiting Eaton’s slow-growing auto business, which has experienced declining sales and compressed operating margins, will allow the company to focus on more promising businesses. Chief among them are Eaton’s power management solutions and electrical equipment, which are part of the company’s Electric America division and accounted for about 48% of total sales last quarter. Revenues have increased significantly as data centers race to meet the unprecedented demand for artificial intelligence computing power. Electrical Americas’ revenue hit a record high in its most recent quarter, increasing 20% year-over-year. Data center revenue increased 50% year over year. Segment profit was a little short, but it was still a great quarter. “No it [Mobility]electrical equipment, data center exposure, and now liquid cooling exposure will really shine. said Jeff Marks, director of portfolio analysis at Investing Club. Wall Street analysts had a similar opinion. BNP Paribas said this morning’s announcement is “a clear positive for Eaton shareholders as it accelerates the company’s plans to focus on its core high-growth, high-margin electrical and aerospace businesses.” Aerospace is another bright spot for Eaton, although not as much as data center winner Electrical Americas. The division includes products such as hydraulic power packs for business jets and fuel pumps for commercial aircraft, and another benefit is that it allows Eaton to avoid a large corporate tax bill that could result from a divestiture. To obtain tax-exempt status, the company would have to separate its mobility division as a separate entity, withdraw cash, and then merge that business with Dana, but Eaton shareholders would need to own at least 50.1% of the combined entity, while Dana shareholders would own about 49.9%. The deal is different from FedEx spinning off its sub-truckload division into FedEx Freight or DuPont spinning off its electronics business. Qnity: In this case, FedEx Freight and Qnity are separate companies. In this case, Eaton’s mobility business is not 100% sure what to do with these newly issued shares after the transaction closes. “I’m not sure about that. We’ll see what happens in the auto industry closer to the actual split date,” Marks said Thursday, adding, “I think both companies will have some synergies.” “As for the next move with Eaton, we think it’s a decent decision.” What about the next move with Eaton? We already cut some on Wednesday. This was not a change in theory, but rather a profit lock-in after a major performance in 2026. Additionally, SpaceX’s public launch on Friday could cause market volatility, especially in the AI infrastructure space. Eaton’s stock rose more than 4% on Thursday, trading at about $391 per share. That’s why we downgraded Eaton this week from 1 to 2, the equivalent of Buy. (Jim Cramer’s Charitable Trust is a Long ETN. See here for a complete list of stocks.) Subscribers to Jim Cramer’s CNBC Investment Club will wait 45 minutes after Jim sends a trade alert before buying or selling shares in a Charitable Trust. Jim Talks Stocks on CNBC Television The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. It has been prepared based on your receipt of the information provided in connection with the Investment Club and no specific results or profits are guaranteed.
