Stock Thoughts: Ingersoll-Rand
Several days ago I asked my buddy MJ over at Dyslexic Research what he thought of Ingersoll-Rand (IR: chart, web, Y!). I’m not really an industrials guy, as my area of knowledge rests more in energy (specifically oil and gas) and tech. That said, I’ve been making efforts to broaden my knowledge and diversify my portfolio.
MJ, however, is very much in tune with industrial sector, and I figured he’d have a good opinion on the company.
So it was with great interest that I read his opinion post on the company.
As MJ mentions, Ingersoll-Rand is in early stages of acquiring Trane (TT: chart, web, Y!). You know, the air conditioner people. But it turns out that Trane is much larger than I thought, and offer product lines outside of the home HVAC units.
MJ believes that Trane is a stronger company than Ingersoll, and as such, Ingersoll benefits more from the acquisition than Trane does (which is good if you’re looking at Ingersoll stock). However, he also suggests that this would be a great opportunity for Ingersoll to screw up a fairly healthy company. And I agree.
I’m not sure I agree with Ingersoll’s sell off of Bobcat, as that seemed to be a very robust product and a fairly bullet-proof brand. Trane could bring some street-cred back to IR, but it will take some time according to MJ:
After seeing mergers from the inside out, it will take roughly six months to a year for the two companies to properly integrate into one another and see potential synergy savings. After that both companies might be able to flourish. -Source
In my opinion, a lot will depend on how they structure the acquisition. If Trane operates as a subsidiary, I think the integration process will be fairly smooth, as it will be a matter of book keeping. However, if it is a merger in the truest sense of the word, I’d look at 18 months before you see signs of a single, well oiled machine.
I’ll let you read about MJ’s outlook on Ingersoll and his official opinion on the stock at his blog, and he’s brought up some very valid concerns.
For now, I’ll keep digging but will keep Ingersoll-Rand on my watch list.
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