Dec. 18, 2007: Ingersoll Rand to Acquire Trane for $10.1 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, 2007. 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.
Herbert L. Henkel, Ingersoll Rand chairman, president, and chief executive officer, said, “The combination of Ingersoll Rand and Trane will create a global, diversified industrial company with projected pro forma 2008 revenues of $17 billion. 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 5-7 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.”
Fred Poses, Trane chairman and CEO, said, “For our shareowners, this offer represents an attractive price for our shares today and the opportunity to participate in a powerful global diversified industrial company in the future. 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.” Poses will remain in his position until the acquisition is completed.
“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,” said Henkel. “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’s leadership position in the global commercial and residential climate control industry enhances our own highly regarded Hussmann and Thermo King brands.
“Trane's demonstrated long-term organic growth rate, averaging 7 percent to 8 percent per year, compares favorably to the organic growth targets we have established for our business portfolio. Trane’s talented management team and employees have delivered consistent revenue growth and operating margins throughout all phases of the business cycle.
“We believe Trane will deliver strong growth and profitability going forward. Based upon market fundamentals such as rising energy costs and conservation initiatives, we expect solid replacement-demand for energy-efficient products and for retrofit and refurbishment of current systems. Trane’s large installed base of equipment and systems will provide profitable aftermarket growth potential. Also, Trane has the leading market position in North America, and is growing strongly and increasing penetration in international markets.
“On a combined basis, Ingersoll Rand’s climate control operations are projected to have revenues of approximately $11 billion in 2008 and will have a significant presence in all major segments of the associated industries worldwide. It is anticipated this combination will produce annual pre-tax cost and revenue synergies exceeding $300 million by 2010. Anticipated synergies include purchased material savings through supplier rationalization and procurement leverage, improvements in manufacturing costs, and lower general and administrative costs. Longer term, we will benefit from synergies related to cross selling and service revenue expansion.”
Trane’s 2007 annual revenues are expected to be approximately $7.4 billion. Trane has more than 29,000 employees and 29 production facilities worldwide.
Ingersoll Rand’s 2007 annual revenues are projected to be approximately $8.7 billion. The company has 35,000 employees and 80 manufacturing facilities worldwide.
For more information, visit www.ingersollrand.com.
Publication date: 12/17/2007