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Ingersoll-Rand (NYSE:IR) agreed early Monday to buy Trane Inc. (TT) for a combination of cash and stock valued at about $10.1B, including fees and the assumption of $150M of debt. Trane, formerly known as American Standard Companies, makes indoor climate control systems, services and solutions. Under the agreement, each of Trane's approximately 200M common shares will be exchanged for $36.50 in cash and 0.23 of an Ingersoll-Rand share for a total value of $47.81 per Trane share. The purchase price is 29% above Trane's Dec. 29 closing price of $37.20. The addition of Trane, which has expected 2007 revenues of $7.4B, would create a combined company with pro-forma 2008 revenue of $17B, and earnings of $4/share.

"As a result of expected revenue and cost synergies, we are confident that this acquisition will improve Ingersoll Rand’s future earnings growth potential. We believe the new Ingersoll Rand will be capable of sustaining annual organic revenue growth averaging 5-7% and EPS growth exceeding 15% per year, both in excess of our former growth guidance," said Ingersoll-Rand CEO Herbert Henkel. Completion is expected late in the first quarter or early in the second quarter of 2008, subject to, among other things, shareholder and regulatory approvals. If the deal proceeds, it would be the biggest industrial merger since the $15B combination of AlliedSignal and Honeywell in 1999.

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Source: Ingersoll-Rand to Buy Trane for $10.1B