Ingersoll-Rand buys Trane ticket for $10 billion; National Oilwell Varco picks up Grant Prideco for over $7 billion

By Evan Weinberger

New York, Dec. 17 - On a Monday where temperatures in New York struggled to get above freezing and much of the country dug out from epic snow, air conditioning may not be the first thing that comes to mind. It's funny how a $10.1 billion merger, minus around $150 million in outstanding debt, can set the mind wandering.

The announcement Monday morning that Ingersoll-Rand Co. Ltd. and Trane Inc. agreed to just such a merger managed to do just that.

Hamilton, Bermuda-incorporated industrial conglomerate Ingersoll-Rand views the acquisition of Piscataway, N.J.-based Trane as a way to shore up its climate control division. Trane, formerly American Standard Cos. Inc., is a major player in heating, air conditioning and other aspects of climate control.

It also marks the continuation of Ingersoll-Rand's reorganization. In April, Ingersoll-Rand sold its road construction equipment making division to Sweden's AB Volvo for $1.3 billion. And in November, Ingersoll-Rand's Bobcat light vehicle division was sold to Doosan Infracore of South Korea for $4.9 billion.

Ingersoll-Rand's existing Hussman and Thermo King brands produce supermarket refrigeration systems and cooling units for delivery trucks, respectively. For Ingersoll-Rand chairman, president and chief executive officer Herbert L. Henkel, the acquisition represents a chance for the company to add depth to its operations.

"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," Henkel said in a statement released by the two companies.

"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."

Aside from increasing Ingersoll-Rand's corporate reach, the $47.81-per-share deal - Trane shareholders will each get $36.50 in cash and 0.23 Ingersoll-Rand share for each share of Trane - will result in an $11 billion climate control division. Ingersoll-Rand will have a $17 billion market capitalization when the deal, which is expected to close in the spring, comes through, the statement said.

"We think the deal would be beneficial to Ingersoll-Rand, as we view Trane as a well-run climate control company whose growth is likely to continue to outpace peers'," Standard & Poor's analyst Christopher Lippincott told Forbes.com. "But we think Ingersoll-Rand is paying a rich valuation."

The fear that Ingersoll-Rand (NYSE: IR) paid too much for Trane drove its stock price down $5.58, or 11.35%, to $43.60 on Monday.

Trane stock (NYSE: TT) rode the rails to an $8.04, or 21.61%, gain for a close at $45.24 Monday.

Ingersoll-Rand's stock performance was more in line with the general mood on Wall Street Monday, as inflation fears bashed investors.

The Dow Jones Industrial Average gave back 172.65 points, or 1.29%, to close at 13,167.20.

The Nasdaq slumped 61.28 points, or 2.32%, for a 2,574.46 close as semiconductor makers and other tech stocks were taken to the woodshed.

And the S&P 500 closed at 1,445.90, a drop of 22.05 points, or 1.50%, on the day.

National Oilwell Varco strikes deal

National Oilwell Varco, Inc. and Grant Prideco, Inc. announced they had entered into a definitive merger agreement worth around $7.37 billion, or $58 per share, Monday before the markets opened.

National Oilwell Varco is an oil and gas drilling and services firm, and Grant Prideco produces equipment for oil drilling. Both firms are based in Houston.

National Oilwell Varco shareholders will own 86% of the new entity, while Grant Prideco shareholders will own 14%. They will receive $23.20 in cash and 0.4498 share of National Oilwell Varco stock. That represents a 22% premium on Grant Prideco stock's closing price on Friday.

"We are delighted with the way this transaction advances our strategic goal of providing more products and services to our customers," National Oilwell Varco chairman, president and CEO Pete Miller said in a statement. "We believe Grant Prideco's product range will add new growing market segments to National Oilwell Varco and benefit our customers' needs worldwide."

The deal is expected to close late in the first quarter or early in the second quarter of 2008.

National Oilwell Varco (NYSE: NOV) stock dropped $6.68, or 8.63%, to close at $70.69.

Grant Prideco (NYSE: GRP) stock went the other way, gaining $6.45, or 13.59%, for a $53.91 close.

Loews spins off cigarette maker

New York-based Loews Corp. announced Monday morning the spinoff of its cigarette-making arm Lorillard Inc. into a separate publicly traded company.

Lorillard is a wholly owned subsidiary of Loews and makes Newport, Kent, True, Maverick and Old Gold cigarettes.

Lorillard will be spun off to holders of Carolina Group, another Loews subsidiary, and Loews common stock in a cash-free transaction. Carolina Group stockholders will each receive one share of Lorillard stock to replace their existing stock. That total represents 62% of the total stock in Lorillard.

The other 38% of Lorillard is held by Loews, and the company will make an exchange offer for shares of outstanding Loews common stock.

"This transaction is consistent with our unrelenting focus on long-term value creation," James S. Tisch, CEO of Loews, said in a statement. "A spinoff of Lorillard will benefit both companies as well as the holders of Loews common stock and Carolina Group stock."

The deal is expected to close in the middle of 2008.

Loews stock (NYSE: LTR) gained $1.14, or 2.44%, for a $47.94 close on the news Monday.

Carolina Group (NYSE: CG) was also up on the day, gaining $1.25, or 1.43%, to close at $88.55.

Jaguar, Land Rover winner to emerge soon

Media reports swirled with speculation Monday that Ford Motor Co. would name the buyer for its British luxury brands Land Rover and Jaguar later this week.

London's Sunday Times reported over the weekend that Indian car manufacturer Tata Motors was set to win the bidding. Tata's Indian rival Mahindra & Mahindra and American private equity firm One Equity are the three remaining bidders for the car lines.

Jaguar and Land Rover are expected to sell for around £1 billion.

Tata Motors has already received the backing of Land Rover and Jaguar's unions.

Ford will use the capital earned from the sale to help with its U.S. restructuring.

Dearborn, Mich.-based Ford stock (NYSE: F) dipped $0.09, or 1.31%, to close at $6.80 Monday.

S&T Bancorp to acquire IBT

S&T Bancorp, Inc. and IBT Bancorp, Inc. announced merger plans Monday before the market open.

Indiana, Pa.-based S&T Bancorp, the holding company for S&T Bank, announced that it would take control of Irwin, Pa.-based IBT, the holding company for Irwin Bank & Trust, for a total of around $171 million.

Holders of IBT stock will receive $31 per share in cash plus between 0.93 and 0.97 share of S&T stock as part of the deal, which will close in the second quarter of 2008.

As part of the deal, three members of IBT's board of directors will gain seats on S&T's board.

S&T Bancorp stock (Nasdaq: STBA) slipped 22 cents, or 0.76%, to $28.63 on the day.

IBT stock (Amex: IRW) skyrocketed $8.61, or 44.87%, to $27.80 on Monday.

Bristol-Myers Squibb dumps imaging unit

New York-based pharmaceuticals giant Bristol Myers-Squibb Co. dumped its medical imaging business Monday.

The company announced before the market open that it would sell Bristol-Myers Squibb Medical Imaging to private equity shop Avista Capital Partners for $525 million.

The deal is expected to close by the end of January.

When the deal is completed, the company will operate under a new, still-to-be-chosen name.

The sale did not do much for Bristol-Myers Squibb stock (NYSE: BMY), which lost 27 cents, or 0.96%, to close at $27.81 on the day.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.