Ingersoll-Rand to Spin Off Commercial, Residential Security Businesses
CARMEL, Ind. — Ingersoll-Rand (IR) will spin off its commercial and residential security businesses to form a new standalone, publicly-traded company, the firm announced Monday.
The existing company will continue to operate through its industrial, transport refrigeration, and heating, ventilation and air conditioning groups, while the newly-formed business will focus on electronic and mechanical security.
The spin-off, which is expected to be tax free to shareholders, is scheduled to be completed in about 12 months.
The new company will include brands such as Schlage, LCN, Von Duprin, Kryptonite, Falcon and Fusion Hardware Group. In a press release, IR stated the newly created company will have annualized revenue of approximately $2 billion on a pro forma basis, based on 2011 revenues.
“We believe the spin-off, which is the result of an in-depth review of strategic alternatives by our [board of directors] and management, will allow both companies to enhance value by allocating capital and deploying resources,” IR CEO Mike Lamach says. “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.”
Slight pressure from Trian Fund Management LP, which acquired a 7% stake in the company, prompted IR to undertake a strategic review, Reuters reports. The industrial conglomerate, which makes products that include commercial heating and cooling units, door locks and golf carts, has a market value of about $15 billion.
Some analyst noted that IR has floundered compared to its competitors partly due to the disparate nature of its business, according to the Wall Street Journal. This information led to Trian suggesting that IR split into three stand-alone public traded companies, as well as way for the business to improve its margins and capitalize on its robust cash flow.
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