In my quest for a buy-it-and-forget-it stock, I looked at Ingersoll-Rand (IR: chart, web, Y!) a while back as a diversified industrial conglomerate addition to my portfolio.

In that previous post, MJ over at Dyslexic Research went back and forth on the benefits of the Trane/Ingersoll transaction.  If you remember, MJ thought Trane would bring significant value to IR, and if the housing and commercial property sector would have been as robust after the deal as before, I think he would probably have been rht.

As it turns out though, IR is now taking a $3.7 billion write down of the acquisition of Trane.

IR reported better than expected numbers from continuing operations, and revealed an outlook for 2009 that isn’t too far out of sync with the Street’s expectations.  That outlook alone lifted share prices more than 12% despite the write-down.

For the fourth quarter of 2008, IR posted a net loss of $3.3 billion compared to a profit of $2.5 billion for the same quarter of 2007.  It is evident now that Ingersoll overpaid for the Trane acquisition, as evidenced by the huge write-down, and since the economy has been flipped on its head since the acquisition, it doesn’t look good for heating and air sales for 2009.

It appears that the decision to buy Trane has taken its toll at the top for IR, as Chairman and Chief Executive Herbert Henkel unexpectedly announced his retirement with a target time frame of “next year”.

Corner Office Comments

In the long run I think Ingersoll Rand will survive, as their diversification in the industrial sector is probably going to insulate them sufficiently from a collapse.  However, the Trane deal was a bad one (hindsight being what it is), and I don’t look for that part of the company to make money any time soon.  How well the rest of the company can subsidize the HVAC sector will be seen in the coming quarters.

In reality, our discussion on the IR/TT merger wasn’t forward looking enough, if there can be such a thing, and neither of us really considered where the economy was going (at that time, June of last year, I don’t think anyone really knew).

Anyway, neither of us pulled the trigger on IR; they’ve dropped nearly 37% since then.

Investing acquisitions, Herbert Henkel, Ingersoll-Rand, IR, Trane