Carrier and ICP: 'Distinct and separate'

August 15, 2000
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FARMINGTON, Conn. — Carrier’s intended purchase of International Comfort Products Corp. (ICP) won’t affect either of the two companies’ existing brand names, according to president John Lord. ICP will operate as a separate subsidiary of Carrier, and will maintain operations in Franklin, Tenn.

“Sales, distribution, brands, and support service will be maintained as is.”

ICP’s unitary product lines include Arcoaire, Airquest, Comfortmaker, Heil, and Tempstar. Carrier brands include Bryant, Carrier, Day & Night, Payne, and WeatherMaker.

Lord also said that key administrative functions would remain separate, although he said he did expect some “redundancies” in financial operations between the two industry giants.

Dealers will remain “distinct and separate,” he said. He also said he did not anticipate any price changes, up or down.

Distribution, tech integration

Lord said Carrier and ICP would maintain their existing two-step distribution.

While he acknowledged that some distributors now handle both Carrier and ICP lines, he said there was “little overlap” in the distributor customer base. According to a Securities Exchange Commission report, ICP has around 400 distributors.

Lord also said ICP distributors he had spoken with were “quite positive” about the change, due to the “ultimate stability” the ICP network would receive from its association with Carrier and parent company United Technologies Corp. (UTC). Lord cited ICP distributors’ previous concerns over “long-term survivability.”

Carrier had planned to meet with its own distributorship last week. Lord said there had not been a lot of direct feedback from them thus far concerning the proposed buyout, but noted that “People get concerned about change.”

More changes seem likely on the manufacturing side. A Carrier announcement said the companies “intend to generate significant cost savings by accelerating implementation of advanced manufacturing practices and product delivery systems, as well as achieving greater efficiencies in all areas of operations, including purchasing synergies and technology integration.”

The latter could also mean the development of an ICP product using Carrier’s Puron® refrigerant (R-410A), which Lord said ICP had already been looking into. The refrigerant itself definitely would be made available to ICP dealers as the “industry transition” to this replacement refrigerant takes place, Lord said.

Adds market share

The deal gives Carrier an estimated 11-point market share gain in the residential-light commercial sector for furnaces and unitary products, placing it at about 32% of the market.

In recent years, ICP pushed about 500,000 furnaces and 700,000 central air conditioners out the door. The manufacturer sells to about 400 wholesalers in North America and overseas.

Cooling products accounted for two-thirds of its sales, heating products 22%, and the remainder were service products. About 70% of its sales were replacements, and the balance went into new construction.

The acquisition also includes a 1 million-sq-ft manufacturing plant in Lewisburg, Tenn., as well as distribution and training centers in four other states. The company also has manufacturing and distribution centers in four Canadian provinces.

Carrier Corp. said it had 1998 worldwide sales of nearly $7 billion.

Lord said Carrier will keep ICP’s Lewisburg plant, and probably would invest further in it.

Now what?

The sale is subject to various U.S. and Canadian regulatory controls. In addition, the deal needs regulatory approval in some European nations and Brazil.

UTC will pay a purchase price of approximately $490 million in cash for all of the outstanding shares of ICP, and will assume approximately $230 million in debt.

The transaction is contingent on valid tender of at least 71% of ICP shares. The directors of ICP are “unanimously recommending that all ICP shareholders accept UTC’s offer,” according to Carrier.

SnyderCapital Corp., through its affiliate Ravine Partners Ltd., also agreed to sell its common shareholdings of ICP. Ravine Partners Ltd. owns shares representing approximately 19.9% of ICP’s common stock.

This article was contributed to by News editors Ed Bas, B. Checket-Hanks, and Thomas A. Mahoney.

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