Ingersoll to buy Trane for $10 billion

In a deal worth a cool $10 billion, Ingersoll-Rand Co. will acquire Trane Inc. and create one of the world’s largest makers of commercial and residential home air conditioners, refrigerators for trucks and stores, and other climate-control products.

But some Ingersoll-Rand shareholders, who had expected the cash-rich company to pour some money into share repurchases, seemed disappointed with the acquisition announced Monday and sold Ingersoll-Rand stock, driving shares down sharply.

The $10.1-billion cash and stock deal -- one of the largest industrial buyouts in recent years -- gives Ingersoll-Rand, which makes Thermo King refrigerated trucks and Hussmann refrigerated display cases, access to Trane’s building and transportation cooling systems.

“What they bought in Trane is a premier position in climate control” with $11 billion in annual revenue, said industrial manufacturing analyst Eli Lustgarten of Longbow Securities.

That will be nearly two-thirds of the combined company’s expected 2008 revenue of $17 billion, slightly more than double the current total revenue for each.

Lustgarten noted that the deal would make the combined company No. 2 in air conditioning, after the $14-billion-a-year business of Carrier Corp., a unit of United Technologies Corp.

The acquisition comes at a time when use of air conditioning is increasing in emerging markets. Sales are growing 25% a year in India, for example, where Carrier is building a $50-million research and development center.

Bermuda-based Ingersoll-Rand, which has operational headquarters in Woodcliff Lake, N.J., manufactures such products as air compressors, Club Car golf carts and Schlage locks and door hardware. Piscataway, N.J.-based Trane, formerly known as American Standard Cos., focuses almost exclusively on residential and commercial climate control.

Trane shares jumped $8.04, or 21.6%, to $45.24, while Ingersoll-Rand shares dropped $5.58, or 11.4%, to $43.60. Each lost about 15 cents in after-hours trading.

Under terms of the agreement, Trane shareholders will receive $36.50 a share, or a total of about $7.5 billion, plus 0.23 of an Ingersoll-Rand share for each Trane share. At Friday’s closing price, that equates to $47.81 a Trane share, nearly a 30% premium over Trane’s value Friday.