Hamilton, Bermuda-based Ingersoll-Rand Co. last week announced that it has executed a definitive agreement to acquire Trane Inc., formerly American Standard Companies Inc., in a transaction valued at approximately $10.1 billion, including transaction fees and the assumption of approximately $150 million of Trane net debt. Headquartered in Piscataway, N.J., Trane is a global provider of indoor climate control systems, services and solutions with expected 2007 revenues of $7.4 billion.
Under the terms of the merger agreement, which has been approved by the boards of directors of both companies, Ingersoll Rand will acquire all outstanding common stock of Trane. Holders of Trane’s approximately 200 million common shares will receive a combination of $36.50 in cash and 0.23 Ingersoll Rand shares of common stock per each Trane share. The total value for this transaction was $47.81 per Trane share based on the closing price as of Dec. 14. The transaction, which is expected to close late in the first quarter or early in the second quarter of 2008, is subject to approval by Trane shareholders, regulatory approvals and customary closing conditions.
“The combination of Ingersoll Rand and Trane will create a global, diversified industrial company with projected pro forma 2008 revenues of $17 billion,” said Herbert Henkel, Ingersoll Rand chairman, president and CEO. “The new Ingersoll Rand portfolio will include an $11 billion Climate Control business which will offer high value equipment, systems and services necessary for delivering solutions across the temperature spectrum for indoor, stationary and transport applications worldwide.
“As a result of expected revenue and cost synergies, we are confident that this acquisition will improve Ingersoll Rand’s future earnings growth potential. We believe the new Ingersoll Rand will be capable of sustaining annual organic revenue growth averaging 5 to 7 percent and EPS growth exceeding 15 percent per year, both in excess of our former growth guidance. In particular, assuming timely consummation of the proposed acquisition, we anticipate earnings of $4.00 per share in 2008.
“This acquisition represents a significant next step in Ingersoll Rand’s decade-long transformation to become a leading global diversified industrial company, with strong market positions across the climate control, industrial and security markets. The acquisition of Trane meets our long-term objectives of significantly increasing consistency of revenue and income streams, adding strong brands and market positions, and further strengthening the organic growth potential of our portfolio.
Trane Inc. provides systems and services designed to enhance the quality and comfort of the air in homes and buildings around the world. The company offers customers a broad range of energy-efficient heating, ventilation and air conditioning systems; dehumidifying and air cleaning products; service and parts support; advanced building controls; and financing solutions.
Credit Suisse, Goldman, Sachs & Co. and J. P. Morgan Securities Inc. served as financial advisors to Ingersoll Rand, and Simpson Thacher & Bartlett LLP served as its legal advisor.
