Trane shareholders overwhelmingly approved the acquisition in a special meeting at Trane’s headquarters in Piscataway, N.J. Under terms of the agreement, Ingersoll Rand acquired all outstanding common stock of Trane. Holders of Trane’s approximately 200 million common shares receive a combination of $36.50 in cash and 0.23 Ingersoll Rand shares of common stock per each Trane share.
“The acquisition of Trane represents a major milestone in the history of Ingersoll Rand and culminates a significant transformation of our business portfolio,” said Herbert L. Henkel, Ingersoll Rand chairman, president and chief executive officer.
“Today, Ingersoll Rand is a global, diversified industrial company with projected pro forma 2008 revenues of $17 billion and leading positions in global climate control, industrial, and security markets.”
According to Henkel, “with the addition of Trane, Ingersoll Rand is composed of businesses that offer better balance across product and geographic markets, leadership brands, strong market shares, growing global presence, and powerful distribution networks, all of which enhance the potential for improved growth, earnings, and cash flow.
“In particular, the Trane acquisition allows us to offer a full range of heating, air conditioning, and climate control systems and services that enhance personal comfort, preserve food and perishables, and increase business efficiency. On a combined basis, we expect these comfort and climate control businesses to generate revenues of approximately $11 billion in 2008, while our industrial and security businesses each are expected to generate revenues of approximately $3 billion in 2008.
“We will continue to focus on integrating Trane and delivering the expected pre-tax cost synergies of $125 million in the first full year and $300 million by 2010. These synergies will result from supplier rationalization and procurement leverage, manufacturing initiatives, and reduction in general and administrative costs. Also, we will pursue growth synergies, including service revenue expansion and cross selling.”
NEWS:How will Ingersoll Rand and Trane likely influence each other as this marriage settles in?
Pannier:From every perspective - customer, employee, and shareholder - we believe this transaction will create substantial value over the long term. When we look at Trane’s global leadership positions in commercial HVAC and residential HVAC, through its powerful Trane and American Standard® Heating & Air Conditioning brands, we see enormous potential, especially with our roster of climate control businesses, Thermo King and Hussman.
Our combined expertise in the areas of air conditioning systems and service, indoor comfort, building controls, and stationary and transport refrigeration will enable tremendous opportunities for growth.
Lamach:The areas of refrigerant technology and compressor efficiency are primary areas of joint research and development. In the broader picture, the development of the Cold Chain is of great interest. The Cold Chain comprises all of the activities and processes necessary to preserve foods and perishables from their point of origin through their point of consumption or use.
NEWS:Are there any opportunities for synergies among the broad spectrum of brands?
Pannier:One of our core principles is something we call Dual Citizenship. That simply means that we will leverage the total enterprise to drive operational and financial progress. So, one business will help another when there are common areas of interest, such as sourcing, product development, channel or market expansion.
Specifically, there are obvious areas where the businesses have a high degree of common interest, such as refrigerant technologies and compressors, which are at the heart of climate control systems.
NEWS:How might Ingersoll Rand (Hussman) and Trane take advantage of each service organization’s strength in the market?
Lamach:Each business has unique strengths in the service area. We will be exploring the best way to leverage each organization’s specific strengths for the benefit of our entire climate-control business.
BRAND FUTURESDiscussing the fate of the two brands that he is charged with, Pannier also said, “Our two premium residential brands, American Standard® Heating & Air Conditioning and Trane, now join other well-known brands that make up the Ingersoll Rand portfolio. All highly regarded leaders in their respective industries, these businesses include: Club Car, Hussmann, Ingersoll Rand, Schlage, and Thermo King.
“Down the road, growth and collaboration opportunities may exist with common customers. For example, Trane, American Standard Heating & Air Conditioning, and the Schlage brand are found in an increasing number of homes in North America.
“Ingersoll Rand is firmly committed to the American Standard Heating & Air Conditioning brand and its premier distributor and dealer network.
“Both the Trane and American Standard Heating & Air Conditioning brands will remain a vital part of our business. It’s business as usual. Our channel partners should see no changes for the foreseeable future. Trane is the leader in indoor air quality in the residential HVAC market, and American Standard Heating & Air Conditioning is the fastest growing premium brand in the HVAC industry. We intend to build on that momentum.”
Lamach added, “With the power of Ingersoll Rand behind our two brands, we’re poised to deliver new opportunities to enhance the business of our distributors and dealers, as well as the quality, health, and comfort of the air in our customers’ homes and buildings.”