General industrial company, Ingersoll-Rand Plc (IR), announced that Allegion US Holding Company – its wholly-owned subsidiary – proposes to privately offer senior notes. However, Ingersoll Rand will neither be a guarantor nor an obligator to the notes.
In Dec 2012, Ingersoll approved a plan to spin off its commercial and residential security businesses. The company expects the divestiture to be complete prior to year-end 2013. Subsequent to the spin-off, the two businesses will be combined to form a new company.
The move to issue notes will be beneficial to the company’s commercial and residential security businesses as Allegion intends to use the cash proceeds from the issue to pay a special cash distribution to the same. The distribution is expected to take place before the proposed spin-off of the commercial and residential security businesses.
In June, Ingersoll Rand completed the offering of $1.55 billion notes. The offering consisted of three tranches; viz., 2.875% Notes worth $350 million due in 2019, 4.25% Notes worth $700 million due in 2023 and 5.75% Notes worth $500 million due in 2043. The proceeds from the issue are expected to pay off the company’s 6.00% Senior Notes worth $600 million due in 2013 and 9.5% Senior Notes worth $655 million due in 2014. The remainder will be used for the proposed spin-off.
This early retirement of the notes will incur a redemption premium expense for the company to the tune of $46 million and is expected to negatively impact the company’s third-quarter 2013 earnings by roughly 15 cents per share. The Zacks Consensus Estimate for the said quarter stands at $1.10 per share.
Ingersoll Rand is one of the leading providers of security and safety, climate control, industrial productivity and infrastructure products. The company currently carries a Zacks Rank #2 (Buy). Other stocks that are worth a look in the industry include Gorman-Rupp Co. (GRC), Graham Corp. (GHM) and The Middleby Corporation (MIDD). While Gorman-Rupp and Graham Corp. carry a Zacks Rank #1 (Strong Buy), Middleby carries a Zacks Rank #2 (Buy).
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