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By Jennifer Yousfi
Ingersoll-Rand Company Limited (IR) announced yesterday (Monday), a plan to purchase Trane Inc. (TT) for just over $10 billion. Ingersoll will acquire all of Trane's 200 million outstanding shares of common stock. Existing shareholders will receive a combination of $36.50 in cash and 0.23 Ingersoll-Rand shares of common stock per each Trane share. The deal represents a 29% premium for Trane shareholders based on Friday's closing price.
"The combination of Ingersoll-Rand and Trane will create a global, diversified industrial company with projected pro forma 2008 revenues of $17 billion,", Ingersoll-Rand chairman, president and chief executive officer, said in
At a time when private equity has been dominating the headlines, this merger is one of the largest recent buyouts fueled by corporate dollars rather than private venture money. The recent sale of Ingersoll-Rand's Bobcat tractor division to South Korea's Doosan Infracore Co., Ltd. (042670) for $4.9 billion will fund some of the purchase. The remainder will come from a combination of newly issued equity and debt.
New Jersey-based Trane is a global leader in air conditioning systems and services. Its acquisition will complement Ingersoll's transport temperature-control division, which manufactures Thermo King refrigerated trucks.
"Combining Trane and Ingersoll-Rand's climate control operation creates a very strong business. With the size, strength and operational effectiveness of a $17 billion global industrial company, we believe this combination is best for our customers, employees and shareowners in the long term," , Trane chairman and CEO, said in the Ingersoll statement.
Trane's shares climbed 21% to close at $45.24, while Ingersoll-Rand's dropped over 11% to $43.60 at Monday's close. Despite the initial negative impact to Ingersoll's stock, most believe the buyout is a good move for the firm.
"This is totally complementary for Ingersoll," Nicholas Heymann, an analyst with New York-based Sterne, Agee & Leach Inc. told Bloomberg. "It's not going to overstretch their balance sheet and it's going to give them a tremendously better global footprint."
The deal still requires regulatory approval and a vote from Trane's shareholders before being finalized.
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IR to buy AC-provider Trane in a $10.1 billion bid