Ingersoll-Rand to acquire Cameron’s centrifugal compression division for $850 million

Ingersoll-Rand Plc, a maker of heating and air-conditioning systems has agreed to acquire Cameron International's centrifugal compression division for $850 million, The New York Times reported.

The deal, announced yesterday, comes as the company's largest after its Trane acquisition. Trane makes indoor heating and air-conditioning systems. The deal was valued at $10.1 billion in 2007, according to Standard & Poor's Capital IQ data. More recently, Ingersoll-Rand had focused on streamlining, as activist investor Nelson Peltz upped pressure on the company. Last year the company spun off its combined home and commercial security operations.

The business makes centrifugal compression equipment and aftermarket parts and services for global industrial applications, air separation, gas transmission and process gas. Based in Houston, it has 850 employees and had revenue of $396 million last year.

Ingersoll-Rand plans to finance the acquisition through a combination of cash on hand and debt, and expect it to be accretive to its earnings per share in 2015. The price represented a multiple of 10.5 times the division's estimated 2015 earnings before interest, depreciation and amortisation, it added.

Cameron said the proceeds from the sale after taxes was expected to be around $600 million. The proceeds would be used for stock buybacks, according to the company.
The oil and gas separation equipment, heaters and water processing systems maker, posted revenue of $396 million for 2013, Reuters reported.

Ingersoll Rand expects the deal to close by the end of the year and add 8-10 cents per share to its earnings in 2015.

According to Cameron, it was selling the unit to focus on its core markets.

Cameron said it expected after-tax proceeds of about $600 million from the sale, which would be partly used for share buybacks.

JP Morgan Securities LLC served as financial adviser to Ingersoll-Rand while Simpson Thacher & Bartlett served as its legal adviser.

For Cameron, Citi served as financial adviser while Strawn and Baker Botts served as legal counsel.

Ingersoll-Rand shares were down at $60.55 on the New York Stock Exchange on Friday.