Diversified manufacturer Ingersoll-Rand said Monday it would buy Trane, a maker of heating and air conditioning systems, for about $9.56 billion in cash and stock.
"During the last several years, we've been transforming our portfolio from a deep cyclical-type machinery-type company to one that is a diversified global-type industrial company," Ingersoll CEO Herbert Henkel told CNBC. "Trane is the last real change, where we take the proceeds from the initial businesses to move over into this side."
The deal values Trane at $47.81 per share, a 28.5 percent premium over its Dec. 14 closing price of $37.20. Ingersoll will pay $36.50 in cash and 0.23 share of its stock for each Trane share.
Ingersoll said that Trane had about 200 million shares outstanding. Based on that share count, the deal was worth $9.56 billion as of Friday's closing price.
Ingersoll said in a statement that including the transaction fees and the assumption of $150 million in debt, the deal was worth about $10.1 billion.
Trane shares rose 23.4 percent to $45.90 before the bell.
Ingersoll shares fell 6.6 percent to $45.95, from a $49.18 close on the New York Stock Exchange on Friday.
The combined companies expect to earn $4 per share in 2008, Henkel said in a statement.
With the acquisition of Piscataway, New Jersey-based Trane, formerly known as American Standard, Ingersoll-Rand said it expects its climate control business to generate $11 billion in revenue in 2008.
"Our climate control business is a global marketplace," Henkel told CNBC. "What we see at this point in time is more than 35 percent of our revenues coming from outside the U.S., but tremendous upside."
The deal, which has been approved by both companies' boards of directors, is expected to generate $300 million in pre-tax cost and revenue synergies by 2010, the companies said.
"Strategically the deal is sound," wrote Deutsche Bank analyst Nigel Coe, in a note to clients. "IR is one of the world's largest manufacturers of refrigeration and air solutions, although it currently has limited presence in the air conditioning world."
Ingersoll is incorporated in Hamilton, Bermuda, but maintains administrative headquarters in New Jersey.
The companies expect the deal to close late in the first quarter of 2008 or early in the second quarter following shareholder and regulatory approval.
CNBC.com contributed to this article.