Ingersoll-Rand plc is to spin off its Industrial segment (Ingersoll Rand Industrial) and combine it with Gardner Denver Holdings Inc, creating an industrial company (IndustrialCo) valued at approximately US$15 billion.
Ingersoll Rand’s current HVAC and transport refrigeration assets will become a pure play global leader in climate control solutions for buildings, homes and transportation (ClimateCo).
IndustrialCo, which is expected to be called Ingersoll Rand and trade under Ingersoll Rand’s existing ticker (NYSE: IR), will be home to Gardner Denver and Ingersoll Rand Industrial, including Ingersoll Rand’s pending acquisition of Precision Flow Systems (PFS), which is expected to close by mid 2019. IndustrialCo will have 2019 pro forma revenue of around US$6.6 billion.
Gardner Denver CEO Vicente Reynal and executives from both companies will lead IndustrialCo. The IndustrialCo board will be headed by Gardner Denver chairman Peter Stavros and include seven Gardner Denver and three Ingersoll Rand designated directors. IndustrialCo’s corporate operations will be located in Davidson, North Carolina.
Michael Lamach, Ingersoll Rand’s chairman and CEO, along with the current Ingersoll Rand executive team, will continue to lead ClimateCo, which is expected to be renamed.
Through the “Reverse Morris Trust” transaction, Ingersoll Rand Industrial is expected to be spun off to Ingersoll Rand’s shareholders and simultaneously merged with and surviving as a wholly-owned subsidiary of Gardner Denver. Existing Ingersoll Rand shareholders will own 50.1% of the combined company, with existing Gardner Denver stockholders holding 49.9%. ClimateCo will receive US$1.9 billion in cash from Ingersoll Rand Industrial that will be funded by newly-issued debt assumed by Gardner Denver in the merger.
“This transaction will create a global leader in mission-critical flow creation and industrial technologies, and accelerate both companies’ strategic priorities of deploying talent, driving growth, expanding margins through increased efficiencies and allocating capital effectively,” said Gardner Denver’s Reynal.
Following the close of the transaction, IndustrialCo intends to grant all employees of the combined company – who are not already equity eligible – with an equity award in IndustrialCo.
“In the same spirit in which we granted stock to our employees during Gardner Denver’s IPO, we feel strongly that all employees of IndustrialCo should be owners of their business,” said Gardner Denver’s Stavros. “We believe in fostering an ownership mentality, and that this drives motivation and engagement, something that has been clear in Gardner Denver’s strong performance. We look forward to offering this equity award to all eligible employees of the combined company and working together to drive the business forward to create value for all of our shareholders.”
The transaction is expected to close by early 2020, subject to approval by Gardner Denver stockholders, regulatory approvals and customary closing conditions.