Ingersoll-Rand PLC announced that its board of directors has unanimously approved a plan to spin off its commercial and residential security businesses (the “new security” company). The separation will result in two standalone companies: Ingersoll Rand, a leader in creating comfortable, sustainable and efficient environments through its industrial, transport refrigeration, and heating, ventilation and air conditioning (HVAC) businesses; and the new security company, a leading global provider of electronic and mechanical security products and services, delivering comprehensive solutions to commercial and residential customers. Ingersoll Rand expects the spin-off, which is intended to be tax free to shareholders, to be completed in approximately 12 months.
“Given the distinct strengths and strategies of the two proposed companies, the board believes that this structure will enable investors to value our different businesses separately, creating value for both companies and their shareholders,” said Michael W. Lamach, Ingersoll Rand’s chairman and chief executive officer. “We believe the spin-off, which is the result of an in-depth review of strategic alternatives by our Board and management, will allow both companies to enhance value by allocating capital and deploying resources in a more focused way, while preserving and increasing synergies within their businesses. At the same time, it will position the new security company to build scale and make the necessary investments for the future.
“The new proposed standalone companies will leverage leading market positions, well-known brands and experienced people. We believe both companies will be well positioned to better execute their respective strategic plans to capitalize on future market opportunities, serve customers, create sustainable growth, and enhance shareholder value,” said Lamach, who will continue after the spin-off to serve in his current role as Ingersoll Rand’s chairman and chief executive officer.
Ingersoll Rand will continue to build on its industrial, transport refrigeration and HVAC businesses. The company will serve customers globally through a number of leading brands, including Ingersoll Rand, Trane, American Standard, Ameristar, Thermo King, Aro and Club Car.
Following the separation, the company will have annualized revenue of approximately $12 billion on a pro forma basis based on 2011 revenues. The company is expected to maintain a strong balance sheet and financial policies consistent with an investment grade credit rating.
Ingersoll Rand benefits from strong brand recognition, leading market shares, and differentiated positioning in geographic and end markets. The company will continue to enjoy benefits from synergistic opportunities in sourcing, engineering and technology across its industrial technologies, climate solutions and residential HVAC businesses. Moreover, the company expects to benefit from increased organizational focus and continued progress on operational excellence initiatives to drive significant margin improvement. These foundational strengths, combined with growing energy demand and energy-efficiency regulations that are driving industry transformation, will further position the company to generate profitable, sustainable growth.