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Acquisition of Cameron International's Compression Unit by Ingersoll-Rand

Date:19-08-2014

Ingersoll-Rand has agreed to buy Cameron International’s centrifugal compression business for $850 million.

According to sources, the deal which was announced on Monday is Ingersoll-Rand’s largest since it brought the maker of indoor heating and air-conditioning systems, Trane, in 2007, for $10.1 billion.

Ingersoll-Rand said that the purchase should boost earnings per share in 2015.

Recently, Ingersoll-Rand has been focused on streamlining, as it faced pressure from Nelson Peltz, the activist investor. In 2013, the company spun off its combined commercial and home security operations.

Cameron International Corporation’s centrifugal compression unit makes centrifugal compression equipment and aftermarket parts and services for global industrial applications, gas transmission, and air separation. Cameron International is based in Houston and the company employs 850 employees. In 2013 it had revenue of $396 million.

The acquisition of the compression unit would be financed by a combination of debt and cash on hand. According to Ingersoll-Rand the price represents a multiple of 10.5 times the division’s estimated 2015 EBITDA.

Cameron International said it expected that its proceeds from the sale after taxes would be around $600 million. Ingersoll-Rand said that the proceeds will be used for stock buybacks.

According to the chief executive officer and chairman of Ingersoll-Rand, Michael W. Lamach, Cameron’s Centrifugal Compression division offers engineering strengths, complementary product and manufacturing as well as financial synergies that make the unit a natural fit into their core business and will provide meaningful value to their shareholders. He added that this opportunity expands their Industrial Segment and will be immediately accretive to ROIC, EPS and EBITDA margins.

The deal is expected to close by the end of the year. Stock of Ingersoll-Rand closed at $62.18, an increase of nearly 3 percent.

Simpson Thacher & Bartlett and JPMorgan Chase served as advisers to Ingersoll Rand while, Cameron was advised by Citigroup and Baker Botts and Winston & Strawn, the law firms.

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