Refrigeration behemoth Ingersoll-Rand has reached a definitive agreement to acquire its climate control business rival Trane Inc for $10.1 billion (approximately £5 billion), as it seeks to penetrate deeper into the global HVAC market.
Trane Inc is the parent company of Trane UK, which designs, manufactures and services a range of cooling and heating systems throughout the UK.
Trane Inc expects to post revenues of $7.4bn for the year ending 2007.
Under the terms of the agreement, which has received approval from the board of directors of both companies, Ingersoll-Rand will acquire all ‘outstanding common stock of Trane’ as well as approximately $150 million of net debt.
The shares and cash deal - which will create a company with a projected 2008 sales revenues of $17bn - is expected to be completed by the end of March or the beginning of April 2008.
The transaction is subject to approval by Trane shareholders, regulatory approvals and customer closing conditions.
Commenting on the proposal, Herbert Henkel, Ingersoll-Rand chairman, president and chief executive officer, said: “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.
“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.
He continued: “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 per cent and earning per share growth exceeding 15 per cent per year, both in excess of our former growth guidance.”