Diversified manufacturer Ingersoll-Rand Co Ltd said on Monday it would buy Trane Inc, a maker of heating and air conditioning systems, for about $9.56 billion in cash and stock. The deal values Trane at $47.81 per share, a 28.5 percent premium over its December 14 closing price of $37.20. Ingersoll will pay $36.50 in cash and 0.23 share of its stock for each Trane share.
Ingersoll said that Trane had about 200 million shares outstanding. Based on that share count, the deal was worth $9.56 billion as of Friday's closing price. Ingersoll said in a statement that including the transaction fees and the assumption of $150 million in debt, the deal was worth about $10.1 billion. Trane shares rose 23.4 percent to $45.90 before the bell. Ingersoll shares fell 6.6 percent to $45.95, from a $49.18 close on the New York Stock Exchange on Friday.
The combined companies expect to earn $4 per share in 2008, Ingersoll Chief Executive Herbert Henkel said in a statement. With the acquisition of Piscataway, New Jersey-based Trane, formerly known as American Standard Cos, Ingersoll-Rand said it expects its climate control business to generate $11 billion in revenue in 2008.
"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," Henkel said. The deal, which has been approved by both companies' boards of directors, is expected to generate $300 million in pre-tax cost and revenue synergies by 2010, the companies said.
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