American Standard To Sell Namesake B&K Business
American Standard announced last month that the $11 billion toilets-to-brakes conglomerate dating back to the 19th century would sell its well-known bath-and-kitchen division, spin off its vehicle controls group and rename itself Trane after the flagship brand name of the one business it will keep.
“The board has concluded that separating American Standard into three focused, better understood companies will create greater shareowner value than the current structure,” said Fred Poses, the company’s chairman and CEO, in a press release announcing the plan. “The businesses have the size, global reach, industry leadership and organizational talent to succeed as separate companies.”
American Standard’s decision got early approval from Wall Street when the stock reached an all-time high on the same day. The stock peaked as high as $53.70, up 7% to its highest level since the company went public in 1995.
The company said the separation would allow management to focus on air-conditioning systems and services, its biggest business with $6.8 billion in 2006 sales. The new Trane Co. will remain publicly traded and keep its headquarters in Piscataway, NJ. Trane will still be able to use the American Standard name for some of its HVAC equipment.
Meanwhile, the vehicle control business, with $2 billion in 2006 sales, will be spun off through a stock swap with current American Standard shareholders. The independent, publicly traded company will be likely named Webco, after its signature brand of antilock brakes and electronic suspension systems for heavy trucks and luxury cars.
That leaves the bath-and-kitchen business with 2006 sales of $2.4 billion up for sale.
Whatever price the company receives for the plumbing operations will be used to pay down debt and buy back what will be Trane stock.
American Standard reported a 77% leap in fourth-quarter profits, but by the time of the breakup announcement, the business had lost $18.4 million for 2006. In 2001, the bath-and-kitchen group employed 28,000 people in 66 plants around the world. As of 2006, the group employed 26,000 people in 54 plants.
No part of the breakup requires shareholder approval. The company expects both the sale of kitchen-and-bath operations and the spin-off of Webco to be completed by September.
Current executives of the three units are expected to stay on in their respective roles-all except for one. Poses will remain chairman and CEO, but is expected to retire at the end of this year. A search is already under way to name his successor.