Large Cap Watch List member American Standard Companies Inc. (ASD) announced that it has signed a definitive agreement to sell the company’s worldwide Bath and Kitchen products business to funds advised by Bain Capital Partners, LLC, a leading global private investment firm, for $1.755 billion in cash.
Upon completion of the sale, Bain Capital will acquire all of American Standard’s Bath and Kitchen business with 2006 annual sales of $2.4 billion, 26,000 employees and 54 production facilities in 23 countries worldwide. American Standard will then change its name to Trane. Trane is the flagship brand of its global Air Conditioning Systems and Services business, which last year generated sales of $6.8 billion.
At 0.73x sales, American Standard is selling the bath and kitchen division for a multiple lower than the company’s own 1.03x. However, the lower valuation appears more than justified, because according to the company’s annual report the division had lower asset turnover and lower profitability. Many investors are excited about the prospect of the company’s strongest division trading on a stand-alone basis.
ASD 1-yr chart: