Form S-4
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As filed with the U.S. Securities and Exchange Commission on March 4, 2008

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM S-4

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

 

Ingersoll-Rand Company Limited

(Exact name of registrant as specified in its charter)

 

 

Bermuda   3585   75-2993910

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

Clarendon House

2 Church Street

Hamilton HM 11, Bermuda

(441) 295-2838

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Patricia Nachtigal, Esq.

Senior Vice President and General Counsel

c/o Ingersoll-Rand Company

155 Chestnut Ridge Road

Montvale, New Jersey 07645

(201) 573-0123

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

With copies to:

 

Mario Ponce, Esq.

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017-3954

(212) 455-2000

 

Eileen T. Nugent, Esq.

Thomas W. Greenberg, Esq.

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

(212) 735-3000

 

Approximate date of commencement of proposed sale of securities to the public: As soon as practicable after this Registration Statement is declared effective.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

CALCULATION OF REGISTRATION FEE

 

 

Title of each class of

securities to be registered

  Amount to be
registered
 

Proposed

maximum
offering price
per share

 

Proposed

maximum

aggregate
offering price

 

Amount of

registration fee

Class A common shares, $1.00 par value per share(1)

  Not Applicable(2)   Not Applicable(2)   $2,208,762,353(3)   $86,804(3)(4)
 

 

 

(1) Includes associated preferred stock purchase rights.
(2) Omitted in reliance on Rule 457(o) under the Securities Act of 1933, as amended.

 

 

 

(continued on following page)


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(3) Estimated solely for the purpose of calculating the registration fee and computed pursuant to Rules 457(f)(1) and 457(c) under the Securities Act of 1933, as amended, the proposed maximum aggregate offering price is calculated by multiplying (i) $45.28, the average of the high and low sale prices of Trane common stock, as quoted on the New York Stock Exchange, or NYSE, on February 29, 2008, by (ii) 210,843,156, which is the sum of the number of (a) outstanding shares of Trane common stock and restricted stock units in respect of Trane common stock (195,843,951 as of February 26, 2008), plus (b) shares of Trane common stock issuable upon the exercise of outstanding Trane stock options (13,431,819 as of February 26, 2008), plus (c) shares of Trane common stock reserved and available for issuance under Trane’s deferred compensation plan, employee stock purchase plan and other equity-based plans or trusts (1,567,386). Pursuant to Rule 457(f) of the Securities Act, the anticipated amount of cash ($7,338,215,750) that is to be paid by Ingersoll Rand to the holders of Trane common stock, Trane restricted stock units and Trane stock options in the merger has been deducted from the proposed maximum aggregate offering price (computed as the sum of (A) the cash consideration of $36.50 per share of Trane common stock multiplied by 197,411,337 (which is the sum of the outstanding shares of Trane common stock, the outstanding Trane restricted stock units and the shares of Trane common stock reserved and available for issuance under Trane’s deferred compensation plan, employee stock purchase plan and other equity-based plans or trusts) plus (B) the product of (I) the maximum number of Trane stock options to be cashed-out in the merger (5,231,819, which is the total number of Trane stock options outstanding (13,431,819) minus the maximum number of Trane stock options to be rolled over in the merger as described in the accompanying proxy statement/prospectus (8,200,000)) multiplied by (II) the difference of (1) (x) the cash consideration of $36.50 per share plus (y) the exchange ratio of 0.23 for the stock consideration in the merger multiplied by $45.28, which is the average of the high and low sale prices of Trane common stock, as quoted on NYSE, on February 29, 2008, minus (2) the average weighted exercise price of outstanding Trane stock options, which is $21.55 as of February 26, 2008).
(4) Determined in accordance with Section 6(b) of the Securities Act at a rate equal to $39.30 per $1,000,000 of the proposed maximum aggregate offering price.

 

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.


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Information contained in this proxy statement/prospectus is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This proxy statement/prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under securities laws of such state.

 

Subject to completion, dated March 4, 2008

, 2008

Dear Trane Inc. Shareholders:

On behalf of the board of directors of Trane Inc., I invite you to attend a special meeting of shareholders of Trane to be held on                     , 2008, at         a.m., local time, at the Trane Learning Center, One Centennial Avenue, Piscataway, New Jersey.

At the special meeting, you will be asked to vote to adopt the merger agreement entered into by Trane with Ingersoll-Rand Company Limited and a subsidiary of Ingersoll Rand. The merger agreement provides for a merger in which Trane will become a wholly-owned subsidiary of Ingersoll Rand and each share of Trane common stock you own will be converted into the right to receive:

 

   

0.23 of an Ingersoll Rand Class A common share; and

 

   

$36.50 in cash.

Under limited circumstances, Ingersoll Rand may be required to increase by up to $1.00 per share the amount of cash to be included in the merger consideration and decrease the fraction of an Ingersoll Rand Class A common share by an amount having an equivalent value (based on the average price of Ingersoll Rand Class A common shares traded over a specified period of time prior to closing) to the amount of the increase in cash.

The board of directors of Trane has unanimously determined that the merger agreement and the merger are advisable and fair to, and in the best interests of, Trane and its shareholders and has unanimously approved the merger agreement and the merger. The board of directors of Trane unanimously recommends that you vote “FOR” the adoption of the merger agreement at the special meeting.

In reaching its determination to recommend adoption of the merger agreement, the board of directors of Trane considered, among other things, the opinion of Trane’s financial advisor, Lazard Frères & Co. LLC, that, as of December 15, 2007, the consideration to be paid to the holders of Trane’s common stock in the merger was fair, from a financial point of view, to such holders. Lazard’s opinion is subject to the assumptions, matters considered, limitations and qualifications set forth in its written opinion dated December 15, 2007, which is attached as Annex B to the accompanying proxy statement/prospectus. We urge you to read the opinion in its entirety.

We cannot complete the merger unless the merger agreement is adopted by the affirmative vote of a majority of the shares of Trane common stock outstanding as of the record date. We urge you to read carefully the accompanying proxy statement/prospectus, which includes important information about Trane, Ingersoll Rand and the proposed merger. In particular, please see the section titled “ Risk Factors” beginning on page 23 of the accompanying proxy statement/prospectus which contains a description of the risks that you should consider in evaluating the proposed merger.

Shares of Trane common stock are listed on the New York Stock Exchange under the symbol “TT.” Ingersoll Rand Class A common shares are listed on the New York Stock Exchange under the symbol “IR.” On                     , 2008, the most recent practicable trading day prior to the printing of the accompanying proxy statement/prospectus, the last sales price of Trane common stock was $              per share and the last sales price of Ingersoll Rand Class A common shares was $              per share. Based on the number of shares of Trane common stock outstanding as of the close of business on the record date, and assuming that Ingersoll Rand does not substitute cash for stock in the merger as described above, Ingersoll Rand expects to issue approximately              million Ingersoll Rand Class A common shares in the merger and reserve an additional approximately              million Ingersoll Rand Class A common shares for future issuances upon the exercise of Ingersoll Rand stock options issued in exchange for Trane stock options.

If you are unable to attend the special meeting in person, we urge you to participate in the meeting by voting your shares of Trane common stock through an alternative means. You have a choice of voting over the Internet, by telephone or by sending Trane a completed proxy by mail. Please refer to the instructions on the enclosed proxy card.

Sincerely,

 

FREDERIC M. POSES

Chairman and Chief Executive Officer

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the securities to be issued in connection with the merger or determined if the accompanying proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated                     , 2008, and is being first mailed to shareholders of Trane on or about                     , 2008.


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ADDITIONAL INFORMATION

The accompanying proxy statement/prospectus incorporates by reference important business and financial information about Trane and Ingersoll Rand from documents that are not included in or delivered with this proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference in the accompanying proxy statement/prospectus by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:

 

Ingersoll-Rand Company

P.O. Box 0445

155 Chestnut Ridge Road

Montvale, New Jersey 07645

Attention: Investor Relations

(800) 955-9845

http://investor.shareholder.com/ir/investorkit.cfm

  Trane Inc.

P.O. Box 6820

One Centennial Avenue

Piscataway, New Jersey 08855-6820

Attention: Investor Relations

(732) 980-6125

http://ir.trane.com/investorkit.cfm

In addition, if you have questions about the merger or the special meeting, or if you need to obtain copies of this proxy statement/prospectus, proxy cards, election forms or other documents incorporated by reference into this proxy statement/prospectus, you may contact Georgeson Inc., Trane’s proxy solicitor, at the address and telephone number listed below. You will not be charged for any of the documents you request.

Georgeson Inc.

199 Water Street – 26th Floor

New York, New York 10038

Telephone: 877-668-1643

If you would like to request documents, please do so by                     , 2008 in order to receive them before the special meeting.

For a more detailed description of the information incorporated by reference in this proxy statement/prospectus and how you may obtain it, see “Where You Can Find More Information” beginning on page 124.


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Trane Inc.

Notice of Special Meeting of Shareholders

To the Shareholders of Trane Inc.:

NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Trane Inc., a Delaware corporation (“Trane”), will be held on                     , 2008, at         a.m., local time, at the Trane Learning Center, One Centennial Avenue, Piscataway, New Jersey. The purposes of the special meeting are:

 

  1. To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of December 15, 2007, among Ingersoll-Rand Company Limited, Indian Merger Sub, Inc. (a wholly-owned subsidiary of Ingersoll-Rand Company Limited established for the purpose of effecting the merger) and Trane Inc., which provides for the merger of Indian Merger Sub, Inc. with Trane Inc.

 

  2. To consider and vote upon any procedural matters incident to the conduct of the special meeting, such as adjournment of the special meeting, including any adjournment for the purpose of soliciting additional proxies in favor of the proposal to adopt the merger agreement in the event there are not sufficient votes for approval of the proposal to adopt the merger agreement at the special meeting.

The accompanying proxy statement/prospectus describes the merger agreement and the proposed merger in detail. Trane’s board of directors has determined that the merger agreement and merger are advisable and fair to, and in the best interests of, Trane and its shareholders and recommends that Trane shareholders vote “FOR” the proposal to adopt the merger agreement.

Shareholders of record of Trane’s common stock as of the close of business on                     , 2008 are entitled to receive notice of the special meeting and to vote at it. Shareholders who hold shares in street name may vote through their brokers, banks or other nominees. A list of shareholders eligible to vote at the special meeting will be available for inspection at the special meeting, and at the executive offices of Trane during regular business hours for a period of no less than ten days prior to the special meeting.

Under Delaware law, Trane shareholders of record who do not vote in favor of the merger have the right to exercise appraisal rights in connection with the merger and obtain payment in cash of the fair value of their shares of common stock as determined by the Delaware Chancery Court rather than the merger consideration. To exercise your appraisal rights, you must strictly follow the procedures prescribed by Delaware law. These procedures are summarized in the accompanying proxy statement/prospectus. In addition, the text of the applicable provisions of Delaware law is included as Annex C to the accompanying proxy statement/prospectus.

By order of the Board of Directors,

Mary Elizabeth Gustafsson

Senior Vice President, General Counsel

    and Secretary

Piscataway, New Jersey

                    , 2008

Your vote is very important. Please return your proxy as soon as possible, whether or not you expect to attend the special meeting in person. You may submit your proxy by telephone, through the Internet or by completing, dating and signing the enclosed proxy card and returning it in the enclosed postage prepaid envelope. You may revoke your proxy at any time before the special meeting. If you attend the special meeting and vote in person, your proxy will not be used. Please do not send your common stock certificates at this time. If the merger is completed, you will be sent instructions regarding the surrender of your certificates.


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PROXY STATEMENT/PROSPECTUS

 

 

Trane Inc. is providing this proxy statement/prospectus and accompanying proxy card to you in connection with the solicitation of proxies to be voted at a special meeting of shareholders of Trane and at any adjournment of the special meeting. This proxy statement/prospectus also constitutes a prospectus of Ingersoll-Rand Company Limited for the Class A common shares of Ingersoll-Rand Company Limited to be issued to shareholders of Trane Inc. pursuant to the merger of a wholly-owned subsidiary of Ingersoll-Rand Company Limited with and into Trane Inc.

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     Page

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

   1

SUMMARY

   7

Information about the Companies

   7

The Merger

   8

Merger Consideration

   8

Trane Special Meeting

   10

Recommendation of Trane’s Board of Directors

   10

Opinion of Lazard Frères & Co. LLC

   11

Interests of Certain Persons in the Merger

   11

Regulatory Approvals

   12

Conditions to Completion of the Merger

   12

No Solicitation by Trane

   13

Restrictions on Recommendation Withdrawal

   13

Termination of the Merger Agreement

   13

Termination Fee

   14

Material United States Federal Income Tax Consequences

   14

Differences Between the Rights of Trane and Ingersoll Rand Shareholders

   14

Ability to Demand Appraisal Rights

   14

Listing of Ingersoll Rand Class A Common Shares on the NYSE

   15

Comparative Per Share Data

   16

Comparative Per Share Market Price Data and Dividend Information

   17

Selected Historical Financial and Other Data of Ingersoll Rand

   19

Selected Historical Financial and Other Data of Trane

   20

Selected Unaudited Combined Condensed Pro Forma Financial Data of Ingersoll Rand

   22

RISK FACTORS

   23

Risk Factors Relating to the Merger

   23

Risk Factors Relating to Ingersoll Rand and Trane

   25

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

   25

THE TRANE SPECIAL MEETING

   27

General

   27

Record Date; Voting Information; Required Vote

   27

Voting by Proxy; Revocation of Proxies

   27

Effects of Abstentions and Broker Non-Votes

   29

Share Ownership of Trane Directors and Executive Officers

   29

Solicitation of Proxies

   29

 

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     Page

THE MERGER

   30

General

   30

Background of the Merger

   30

Recommendation of Trane’s Board of Directors; Reasons for the Merger

   39

Opinion of Lazard Frères & Co. LLC

   44

Financial Projections

   51

Ingersoll Rand’s Reasons for the Merger

   53

Interests of Certain Persons in the Merger

   53

Manner and Procedure for Exchanging Shares of Trane Common Stock; No Fractional Shares

   60

Governmental and Regulatory Approvals

   61

Merger Expenses, Fees and Costs

   62

Accounting Treatment

   62

Material United States Federal Income Tax Consequences

   62

Appraisal Rights

   64

Restrictions on Sales of Shares by Certain Affiliates

   67

Stock Exchange Listing

   67

Delisting and Deregistration of Trane Common Stock

   67

THE MERGER AGREEMENT

   68

Form of the Merger

   68

Closing

   68

Effective Time

   68

Merger Consideration

   68

Treatment of Stock Options

   69

Representations and Warranties

   71

Covenants and Agreements

   74

Conditions to the Merger

   83

Termination

   84

Effect of Termination

   85

Termination Fee

   86

Amendment and Waiver

   87

Specific Performance; Third-Party Beneficiaries

   87

DESCRIPTION OF DEBT FINANCING

   88

THE STOCK OPTION ELECTION

   90

Trane Stock Option Election

   90

Election Mechanics

   90

Election Forms and Related Documents

   91

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA OF INGERSOLL RAND

   92

DESCRIPTION OF INGERSOLL RAND’S CAPITAL STOCK

   101

COMPARATIVE RIGHTS OF INGERSOLL RAND SHAREHOLDERS AND TRANE SHAREHOLDERS

   109

EXPERTS

   123

LEGAL MATTERS

   123

SHAREHOLDER PROPOSALS

   123

WHERE YOU CAN FIND MORE INFORMATION

   124

ANNEX A

   Agreement and Plan of Merger    A-1

ANNEX B

   Opinion of Lazard Frères & Co. LLC    B-1

ANNEX C

   Section 262 of the General Corporation Law of the State of Delaware    C-1

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

The following questions and answers are intended to address briefly some commonly asked questions regarding the merger and the special meeting. These questions and answers may not address all questions that may be important to you as a Trane shareholder. To better understand these matters, and for a description of the legal terms governing the merger, you should carefully read this entire proxy statement/prospectus, including the annexes, as well as the documents that have been incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 124. Unless otherwise indicated or the context requires otherwise, all references in this proxy statement/prospectus to “Trane” refer to Trane Inc., a Delaware corporation, and its subsidiaries; all references in this document to “Ingersoll Rand” refer to Ingersoll-Rand Company Limited, a Bermuda company, and its subsidiaries; all references to the “merger agreement” refer to the Agreement and Plan of Merger, dated as of December 15, 2007, among Trane, Ingersoll Rand and Indian Merger Sub, Inc., a copy of which is attached as Annex A to this proxy statement/prospectus.

About the Merger

 

Q: What is the proposed transaction upon which I am being asked to vote?

 

A: Trane shareholders are being asked to vote to adopt a merger agreement entered into between Ingersoll Rand, Indian Merger Sub, Inc. and Trane. In the merger, Indian Merger Sub, Inc., a newly formed, wholly-owned subsidiary of Ingersoll Rand, will be merged with and into Trane. After the merger, Trane will be the surviving corporation and will be a wholly-owned subsidiary of Ingersoll Rand.

 

Q: What vote is required for adoption?

 

A: The merger agreement must be adopted by a majority of the outstanding shares of Trane common stock entitled to vote at the special meeting. If you abstain or fail to vote, it will have the same effect as voting against the adoption of the merger agreement. You are entitled to vote on the merger agreement if you held Trane common stock at the close of business on the record date, which is                     , 2008. On that date,             shares of Trane common stock were outstanding and entitled to vote. Since the number of Ingersoll Rand Class A common shares and the number of securities convertible or exercisable for such common shares that will be issued in the merger does not represent 20% or more of Ingersoll Rand’s outstanding Class A common shares at closing, under the rules of the New York Stock Exchange, which we refer to in this proxy statement/prospectus as the NYSE, the merger is not subject to a vote of Ingersoll Rand’s shareholders.

 

Q: What vote of Trane’s shareholders is required to approve the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies?

 

A: The proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of a majority of the outstanding shares of Trane common stock present or represented by proxy at the special meeting and entitled to vote on the matter.

 

Q: When do you expect the merger to be completed?

 

A: We are working toward completing the merger as quickly as possible, and we anticipate that it will be completed in the second calendar quarter of 2008. However, the exact timing of the completion of the merger cannot be predicted. In order to complete the merger, we must obtain Trane shareholder approval and the other closing conditions under the merger agreement must be satisfied or waived. See “The Merger Agreement—Conditions to the Merger” beginning on page 83.

 

 

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Q: What will Trane shareholders receive in the merger?

 

A: Each holder of Trane common stock will receive 0.23 of an Ingersoll Rand Class A common share and $36.50 in cash for each share of Trane common stock they own (subject, in each case, to the adjustment described in the following sentence). Ingersoll Rand will increase, by up to $1.00 per share, the amount of cash to be included in the merger consideration and decrease the fraction of an Ingersoll Rand Class A common shares to be included in the merger consideration by an amount having an equivalent value as the amount of the increase in cash, if Trane or Ingersoll Rand reasonably determines that those actions are necessary in order to list on the NYSE the Ingersoll Rand Class A common shares to be issued in the merger without the requirement of a vote of Ingersoll Rand shareholders.

 

Q: Will Trane shareholders receive fractional Ingersoll Rand Class A common shares in the merger?

 

A: No. Ingersoll Rand will not issue fractional shares of its common stock. Instead, holders of Trane common stock will receive cash in lieu of a fractional Ingersoll Rand Class A common share based on the per share closing price of Ingersoll Rand Class A common shares on the last trading day immediately prior to the closing of the merger.

 

Q: Can the value of the transaction change between now and the time the merger is completed?

 

A: Yes. The value of the portion of the merger consideration comprised of Ingersoll Rand Class A common shares can change. The exchange ratio is a fixed exchange ratio, meaning that Trane shareholders will receive 0.23 of an Ingersoll Rand Class A common share for each share of Trane common stock owned plus $36.50 in cash (subject to adjustment as previously described) regardless of the trading price of Ingersoll Rand Class A common shares on the effective date of the merger. The market value of the Ingersoll Rand Class A common shares that Trane shareholders will receive in the merger will increase or decrease as the trading price of Ingersoll Rand’s Class A common shares increases or decreases, and, therefore, may be different at the time the merger is completed than it was at the time the merger agreement was signed or at the time of the special meeting. There can be no assurance as to the market price of Ingersoll Rand Class A common shares at any time prior to the completion of the merger or at any time thereafter. Trane shareholders are urged to obtain current trading prices for Ingersoll Rand Class A common shares.

 

Q: Why is Trane proposing the transaction to its shareholders?

 

A: Trane’s board of directors believes that the combination of Trane and Ingersoll Rand will provide substantial financial and strategic benefits to the shareholders of Trane. To review the reasons for the merger in greater detail, see the section entitled “The Merger—Recommendation of Trane’s Board of Directors; Reasons for the Merger” beginning on page 39.

 

Q: What are the federal income tax consequences of the merger?

 

A: Generally, gains arising from receipt of the merger consideration, including the stock portion of the merger consideration, will be taxable to Trane’s shareholders for United Stated federal income tax purposes. For more details regarding the tax consequences of the merger, see the section entitled “The Merger—Material United States Federal Income Tax Consequences” beginning on page 62.

 

Q: Are Trane shareholders entitled to appraisal rights?

 

A: Yes. Under Delaware law, holders of Trane common stock that meet certain requirements will have the right to dissent from the merger and obtain payment in cash for the fair value of their shares of Trane common stock, as determined by the Delaware Chancery Court, rather than the merger consideration. To exercise appraisal rights, Trane shareholders must strictly follow the procedures prescribed by Delaware law. These procedures are summarized under the section entitled “The Merger—Appraisal Rights” beginning on page 64. In addition, the text of the applicable appraisal rights provisions of Delaware law is included as Annex C to this proxy statement/prospectus.

 

 

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Q: How does Trane’s board of directors recommend that Trane’s shareholders vote?

 

A: Trane’s board of directors recommends that Trane’s shareholders vote “FOR” the proposal to adopt the merger agreement and “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement. To review the reasons for the merger in greater detail, see the section entitled “The Merger—Recommendation of Trane’s Board of Directors; Reasons for the Merger” beginning on page 39.

 

Q: Are there risks that shareholders of Trane should consider in connection with the merger?

 

A: Yes. There are risks associated with the merger and holding Ingersoll Rand Class A common shares after giving effect to the merger, including risks that the anticipated benefits of the merger may not be achieved, which are described in the section entitled “Risk Factors” beginning on page 23. Trane urges you to carefully read and consider the information contained in the section entitled “Risk Factors.”

 

Q: Will holders of Trane common stock be able to trade the Ingersoll Rand Class A common shares that they receive in the merger?

 

A: Yes. The Ingersoll Rand Class A common shares received in the merger will be freely tradable unless the recipient is an affiliate of Ingersoll Rand.

 

Q: If the merger is completed, when can I expect to receive the merger consideration for my shares of Trane common stock?

 

A: As soon as reasonably practicable after the effective time of the merger and in no event later than three business days thereafter, Ingersoll Rand will cause an exchange agent to mail to you a form of letter of transmittal and instructions for use by you in effecting your exchange of Trane common stock for the merger consideration. After receiving the proper documentation from you, the exchange agent will forward to you the cash and Ingersoll Rand Class A common shares to which you are entitled under the merger agreement. More information on the documentation you are required to deliver to the exchange agent may be found under the section entitled “The Merger—Manner and Procedure for Exchanging Shares of Trane Common Stock; No Fractional Shares” beginning on page 60. Trane shareholders will not receive any fractional Ingersoll Rand Class A common shares. Instead, they will receive cash, without interest, for any fractional Ingersoll Rand Class A common shares they otherwise would have received in the merger.

 

Q: Will I receive dividends before the effective time of the merger?

 

A: Trane does not expect to change its dividend policies. Trane expects to continue to pay quarterly dividends on shares of Trane common stock until the effective time of the merger. However, under the merger agreement, Trane has agreed to coordinate with Ingersoll Rand regarding the declaration of any dividends with respect to Trane common stock to ensure that the Trane shareholders will not receive more than one dividend, or fail to receive a dividend, for any single calendar quarter on their shares of Trane common stock (or Ingersoll Rand Class A common shares received in exchange therefor in the merger).

 

Q: What happens if the merger is not completed?

 

A: If the merger agreement is not adopted by the Trane shareholders or if the merger is not completed for any other reason, Trane shareholders will not receive any payment for their shares in connection with the merger. Instead, Trane will remain an independent public company and Trane’s common stock will continue to be listed and traded on the NYSE. Under specified circumstances, Trane may be required to pay Ingersoll Rand a termination fee as described under the section entitled “The Merger Agreement—Termination Fee” beginning on page 86.

 

 

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Q: What happens if I sell my shares before the special meeting?

 

A: The record date of the special meeting is earlier than the special meeting and the date that the merger is expected to be completed. If you transfer your shares of Trane common stock after the record date but before the special meeting, you will retain your right to vote at the special meeting, but will have transferred the right to receive the merger consideration in the merger. In order to receive the merger consideration, you must hold your shares through completion of the merger.

About the Special Meeting

 

Q: When and where will the special meeting of Trane shareholders be held?

 

A: The special meeting of Trane shareholders will be held in the Trane Learning Center, One Centennial Avenue, Piscataway, New Jersey, on                     , 2008, at         a.m., local time.

 

Q: If my shares are held in “street name” by my broker, will my broker vote my shares for me?

 

A: You should instruct your broker to vote your shares, following the directions your broker provides. If you do not instruct your broker, your broker generally will not have the discretion to vote your shares. Because the adoption of the merger agreement requires an affirmative vote of a majority of the outstanding shares of Trane common stock as of the close of business on the record date, these so-called “broker non-votes” have the same effect as votes cast against the merger agreement.

 

Q: If my shares are held through the Trane Employee Stock Ownership Plan, Savings Plan or 401(k) and Thrift Plan, how will my shares be voted?

 

A: If you are a participant in the Trane Employee Stock Ownership Plan, the Trane Savings Plan or the Trane 401(k) and Thrift Plan, you will receive one proxy card for all shares allocated to your accounts in these plans. The proxy card will serve as a voting instruction card for the trustee of each of these plans. If you do not vote your shares, the trustee under each plan will vote your shares in the same proportion as shares for which instructions were received under that plan. Many of Trane’s current employees and any former employees holding shares in employee plans who have chosen to do so will receive their proxy card and proxy statement electronically by e-mail. If you hold shares other than through one of these plans, you will receive a separate set of materials, including a separate proxy card and control number, to vote those shares.

 

Q: If my shares are held through the Trane Employee Stock Purchase Plan, how will my shares be voted?

 

A: You should vote any shares held in a Trane Employee Stock Purchase Plan account by completing the materials sent to you by the custodian for that account. If you do not respond to these materials and properly give your custodian voting instructions, the custodian generally will not have discretion to vote the shares on your behalf. Because the adoption of the merger agreement requires an affirmative vote of a majority of the outstanding shares of Trane common stock as of the close of business on the record date, failure to instruct your custodian how to vote any shares held by you in the Trane Employee Stock Purchase Plan account will have the same effect as votes cast against the merger agreement.

 

Q: How will the Trane representatives vote for me?

 

A: The Trane representatives, Frederic M. Poses, G. Peter D’Aloia, Mary Elizabeth Gustafsson and Mark C. Cresitello, or anyone else they choose as their substitutes, have been chosen to vote in your place as your proxies at the special meeting or any adjournment thereof. Whether you vote by proxy card, Internet or telephone, the Trane representatives will vote your shares as you instruct them. If you do not indicate how you want your shares voted, the Trane representatives will vote as Trane’s board of directors recommends. If there is an interruption or adjournment of the special meeting before the agenda is completed, the Trane representatives may still vote your shares when the meeting resumes. If a broker, bank or other nominee holds your common stock, they will ask you for instructions and instruct the Trane representatives to vote the shares held by them in accordance with your instructions.

 

 

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Q: What do I need to do now?

 

A: After carefully reading and considering the information contained in this proxy statement/prospectus, please fill out and sign the proxy card, and then mail your signed proxy card in the enclosed prepaid envelope as soon as possible so that your shares may be voted at the special meeting. Your signed proxy card will instruct the persons named on the card to vote your shares at the special meeting as you direct on the card. If you sign and send in your proxy card and do not indicate how you want to vote, your proxy will be voted “FOR” the adoption of the merger agreement. You may also submit a proxy by telephone or through the Internet by following the instructions with your proxy card. If you do not vote or if you abstain, the effect will be the same as a vote against the merger agreement. If you hold your shares in “street name,” follow the procedures provided by your broker. YOUR VOTE IS VERY IMPORTANT.

 

Q: What will happen if I abstain from voting or fail to vote?

 

A: An abstention by you or your failure to vote, or to instruct your broker to vote if your shares are held in “street name,” will have the same effect as voting against the proposal to adopt the merger agreement.

 

Q: May I change my vote after I have mailed my signed proxy card?

 

A: Yes. You may change your vote at any time before your proxy is voted at the special meeting. You can do this in one of four ways. First, you can send a written notice stating that you want to revoke your proxy to:

Mary Elizabeth Gustafsson, Secretary

Trane Inc.

One Centennial Avenue

Piscataway, New Jersey 08855-6820

Second, you can complete and submit a new later-dated proxy card. Third, you can submit a proxy by telephone or through the Internet at a later time. Fourth, you can attend the special meeting and vote in person. Simply attending the meeting, however, will not revoke your proxy; you must vote at the meeting in order to do so.

If you have instructed a broker to vote your shares, you must follow directions received from your broker to change your vote.

 

Q: Should I send in my stock certificates now?

 

A: No. After the merger is completed, you will receive written instructions for exchanging your stock certificates.

 

Q: What should Trane shareholders do if they receive more than one set of voting materials for the Trane special meeting?

 

A: You may receive more than one set of voting materials for the special meeting, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. Please complete, sign, date and return each proxy card and voting instruction card that you receive. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card.

 

Q: Who pays for this solicitation?

 

A:

The expense of filing, printing and mailing this proxy statement/prospectus and the accompanying material will be borne equally by Trane and Ingersoll Rand. In addition, Trane has engaged Georgeson Inc. to assist in the solicitation of proxies for the special meeting for a fee of approximately $20,000, a nominal fee per

 

 

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shareholder contact, reimbursement of reasonable out-of-pocket expenses and indemnification against certain losses, costs and expenses. Trane will bear the costs related to the solicitation of proxies in connection with the special meeting.

 

Q: Who can help answer my questions?

 

A: If you have any questions about the special meeting or if you need additional copies of this proxy statement/prospectus or the enclosed proxy, please contact Trane’s proxy solicitor:

Georgeson Inc.

199 Water Street – 26th Floor

New York, New York 10038

Telephone: 877-668-1643

 

 

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SUMMARY

The following summary highlights selected information from this proxy statement/prospectus and may not contain all of the information that may be important to you. Accordingly, shareholders are encouraged to carefully read this entire proxy statement/prospectus, its annexes and the documents referred to or incorporated by reference in this proxy statement/prospectus. Each item in this summary includes a page reference directing you to a more complete description of that item. Please see the section entitled “Where You Can Find More Information” beginning on page 124.

Information about the Companies

Ingersoll-Rand Company Limited

Clarendon House

2 Church Street

Hamilton HM 11, Bermuda

(441) 295-2838

Ingersoll Rand is a Bermuda company and is a leading provider of climate control, industrial and security products offering well-recognized industrial and commercial brands.

The Climate Control Technologies segment provides solutions for customers to transport, preserve, store and display temperature-sensitive products by engaging in the design, manufacture, sale and service of transport temperature control units, heating, ventilation and air conditioning (“HVAC”) systems, refrigerated display merchandisers, beverage coolers, auxiliary power units and walk-in storage coolers and freezers. The Industrial Technologies segment is focused on providing solutions to enhance customers’ industrial and energy efficiency, mainly by engaging in the design, manufacture, sale and service of compressed air systems, tools, fluid and material handling and energy generation systems. The Security Technologies segment is engaged in the design, manufacture, sale and service of mechanical and electronic security products, biometric access control systems, and security and scheduling software.

Ingersoll Rand’s sales are made in the U.S. through branch sales offices and through distributors and dealers across the U.S. Non-U.S. sales are made through numerous subsidiary sales and service companies with a supporting chain of distributors. No material part of Ingersoll Rand’s business is dependent on a single customer or a small group of customers. Ingersoll Rand manufactures many of the component parts included in its products and purchases the principal raw material required for the manufacture of its products through numerous suppliers. Ingersoll Rand maintains extensive research and development facilities and spent $128.6 million (excluding discontinued operations) in 2007 on research and development, including qualifying engineering costs.

On April 30, 2007, Ingersoll Rand completed the sale of its Road Development business unit to AB Volvo in all countries except for India which was completed on May 4, 2007, for cash proceeds of approximately $1.3 billion. On November 30, 2007, Ingersoll Rand completed the sale of its Bobcat, Utility Equipment and Attachments business units to Doosan Infracore, Inc., for cash proceeds of approximately $4.9 billion.

Indian Merger Sub, Inc.

155 Chestnut Ridge Road

Montvale, New Jersey 07645

(201) 573-0123

Indian Merger Sub, Inc. is a Delaware corporation and a wholly-owned subsidiary of Ingersoll Rand. Indian Merger Sub, Inc. was organized on December 7, 2007, solely for the purpose of effecting the merger with Trane. It has not carried on any activities other than in connection with the merger agreement.

 

 

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Trane Inc.

One Centennial Avenue

Piscataway, New Jersey 08855

(732) 980-6000

Trane Inc., a Delaware corporation, is a leading global manufacturer of commercial and residential HVAC equipment, systems and controls. Trane also provides aftermarket services to the HVAC industry which include: replacement parts and retrofit products, maintenance services for its and other manufacturer’s commercial products and contracting services for the installation, upgrade, and replacement of commercial HVAC systems featuring its products. Trane’s HVAC systems include commercial systems, such as chillers, air handlers, and terminal devices; commercial unitary systems; and split-system and packaged residential systems, including condensing units, furnaces, air handlers, heat pumps, coils, and air filtration devices, as well as HVAC controls, such as thermostats, unit controls, system controls, and building automation systems. Trane markets its HVAC systems, services, and solutions under Trane and American Standard brands primarily through company-owned and independent offices, independent agents, and wholesale distributors. It has operations in North America, Europe, the Middle East, Asia, and South America. On February 1, 2007, Trane (then known as American Standard Companies Inc.) announced that its board of directors had completed a strategic review of Trane and unanimously approved a plan to separate its three businesses during 2007. In furtherance of the plan of separation, on July 31, 2007, Trane completed a spin-off of its Vehicle Controls Systems business, named WABCO Holdings Inc. (NYSE—WBC). On October 31, 2007, Trane completed a sale of its Bath and Kitchen business to affiliates of Bain Capital Partners, LLC for approximately $1.745 billion after closing adjustments but subject to certain post-closing adjustments. Subsequently, American Standard Companies Inc. changed its name to Trane Inc., and on November 28, 2007 Trane began trading on the NYSE under the ticker symbol “TT.”

The Merger (Page 68)

On December 15, 2007, Trane, Ingersoll Rand and Indian Merger Sub, Inc., a wholly-owned subsidiary of Ingersoll Rand, entered into the merger agreement, which is the legal document governing the proposed merger. Subject to the terms and conditions of the merger agreement, Indian Merger Sub, Inc. will be merged with and into Trane, with Trane continuing as the surviving corporation. Upon the completion of the merger, Trane will be a wholly-owned subsidiary of Ingersoll Rand, and Trane common stock will no longer be publicly traded.

Merger Consideration (Page 68)

Trane Common Stock

Pursuant to the merger, each share of Trane common stock will be exchanged for (i) 0.23 of an Ingersoll Rand Class A common share and (ii) $36.50 in cash, without interest. Ingersoll Rand will increase, by up to $1.00 per share, the amount of cash to be included in the merger consideration and decrease the fraction of an Ingersoll Rand Class A common share by an amount having an equivalent value (based on the average of the volume weighted averages of the trading prices of Ingersoll Rand Class A common shares for each of the ten consecutive full trading days ending on the third trading day prior to closing, which we refer to as the Ingersoll Rand Reference Price) as the amount of the increase in cash, if Trane or Ingersoll Rand reasonably determines that those actions are necessary in order to list on the NYSE the Ingersoll Rand Class A common shares to be issued in the merger without the requirement of a vote of Ingersoll Rand shareholders. Holders of Trane common stock will receive cash, without interest, for any fractional Ingersoll Rand Class A common shares they otherwise would have received in the merger.

The exchange ratio relating to the Ingersoll Rand Class A common shares to be issued in the merger is a fixed ratio, which means that it will not change because of a change in the trading price of Ingersoll Rand Class A common shares between now and the time the merger is completed, subject to the adjustment described

 

 

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above. Therefore, the market value of the Ingersoll Rand Class A common shares received by Trane shareholders in the merger will depend on the market price of Ingersoll Rand Class A common shares at the time the merger is completed. The exchange ratio will be reduced if Ingersoll Rand substitutes up to $1.00 per share in cash for a portion of the stock consideration having an equivalent value (based on the Ingersoll Rand Reference Price) under the circumstances described above. A vote by Trane shareholders for the adoption of the merger agreement constitutes approval of the merger whether or not Ingersoll Rand substitutes up to $1.00 per share in cash for a portion of the stock consideration having an equivalent value as described above.

At the time of the execution of the merger agreement, the Ingersoll Rand Class A common shares expected to be issued in the merger (including those common shares to be issued on the exercise of Ingersoll Rand options issued in exchange for Trane stock options) constituted less than 20% of Ingersoll Rand's outstanding Class A common shares. NYSE rules generally require that a listed company like Ingersoll Rand obtain approval of its shareholders if the number of shares of the company’s stock or securities convertible or exercisable for common stock to be issued in connection with a business acquisition represents 20% or more of its outstanding stock. Ingersoll Rand and Trane agreed that the merger would not be subject to a vote of Ingersoll Rand’s shareholders and, accordingly, agreed that Ingersoll Rand would be required to substitute cash of up to $1.00 per share for a portion of the stock consideration having an equivalent value, if necessary, in order to complete the merger without a vote of Ingersoll Rand shareholders in the event the Ingersoll Rand Class A common shares to be issued in the merger constituted 20% or more of Ingersoll Rand's outstanding Class A common shares at closing.

If Ingersoll Rand substitutes cash for a portion of the stock consideration having an equivalent value (based on the Ingersoll Rand Reference Price), Ingersoll Rand will issue a press release announcing the precise amount of stock consideration to be substituted and will provide for a toll-free number, which will be announced in that press release, where Trane shareholders can call to learn the final exchange ratio as adjusted for the substitution. Ingersoll Rand will make its determination as to whether such substitution will be made prior to the fifth trading day before completion of the merger. Ingersoll Rand will substitute cash of up to $1.00 per share for a portion of the stock consideration having an equivalent value (based on the Ingersoll Rand Reference Price) if the number of Ingersoll Rand Class A common shares to be issued in the merger would equal or exceed 20% of the Ingersoll Rand Class A common shares outstanding immediately prior to the completion of the merger and, therefore, would require a vote of Ingersoll Rand shareholders under the rules of the NYSE.

Treatment of Trane Stock Options

At the effective time of the merger, outstanding Trane stock options (whether vested or unvested) generally will be converted into the right to receive, at the election of each holder, either (1) a cash payment equal to the difference between (i) the exercise price of such stock option and (ii) the sum of (A) the cash consideration plus (B) 0.23 (subject to adjustment if Ingersoll Rand increases the cash consideration and decreases the exchange ratio as described above) multiplied by the Ingersoll Rand Reference Price or (2) a number of fully vested options to purchase Ingersoll Rand Class A common shares (rounded down to the nearest whole share) equal to the number of shares of Trane common stock subject to such option multiplied by 0.96, with appropriate adjustments made to the exercise price under those options based on the value of the merger consideration at closing as determined in accordance with the merger agreement (we refer to the election described in this clause (2) as a “rollover election”). Trane’s board of directors makes no recommendation as to whether any holder of Trane stock options should make a “rollover election” or alternatively elect to receive a cash payment in exchange for Trane stock options held by such holder.

The executive officers of Trane hold vested and unvested Trane stock options. In connection with the stock option election described above, certain executive officers of Trane have executed a side letter with Trane in which they have agreed to make a rollover election with respect to all Trane stock options held by such individual, subject to the pro-ration procedures described in the merger agreement. Those pro-ration procedures

 

 

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provide that Trane stock options held by such individuals (other than certain options that are eligible for favorable tax treatment, referred to as incentive stock options or ISOs) would be cashed out on a pro rata basis to the extent that (A)(i) the total number of options that are to be rolled over (as described in the section entitled “The Merger Agreement—Treatment of Stock Options” beginning on page 69 and in the section entitled “The Stock Option Election” beginning on page 90) plus (ii) the number of shares of Trane common stock issued between December 15, 2007 and the closing (other than shares issued upon exercise of Trane stock options or Trane stock-based awards) multiplied by the exchange ratio of 0.23 (as may be adjusted in accordance with the merger agreement), exceeds (B) 8,200,000. The terms and conditions of the election, as well as instructions for making an election, are described in the section entitled “The Merger Agreement—Treatment of Stock Options” beginning on page 69 and in the section entitled “The Stock Option Election” beginning on page 90 and in the election package sent to the holders of Trane stock options together with this proxy statement/prospectus.

Treatment of Trane Restricted Stock Units

At the effective time of the merger, all outstanding Trane restricted stock units and any accrued dividends will immediately vest in full and will be converted into the right to receive the merger consideration provided to holders of Trane common stock generally. Any dividends accrued on such restricted stock units will be paid in cash within five business days after the effective time of the merger.

Total Ingersoll Rand shares to be issued

Based on the number of shares of Trane common stock and Trane restricted stock units outstanding as of the record date, the total number of Ingersoll Rand Class A common shares to be issued pursuant to the merger to Trane shareholders (assuming no Trane stock options are exercised and Ingersoll Rand does not substitute cash for stock as described above) would be approximately                             .

Trane Special Meeting (Page 27)

When and Where. The special meeting of Trane shareholders will be held on                     , 2008, at         a.m., local time, in the Trane Learning Center, One Centennial Avenue, Piscataway, New Jersey.

Purposes of the Special Meeting. At the special meeting, you will be asked to consider and vote upon a proposal to adopt the merger agreement. You will also be asked to consider and vote upon any procedural matters incident to the conduct of the special meeting, such as adjournment of the special meeting, including an adjournment for the purposes of soliciting additional proxies.

Record Date; Voting Power. Holders of Trane common stock as of the close of business on                     , 2008, the record date, are entitled to vote at the special meeting or any adjournment or postponement thereof. Each share of Trane common stock is entitled to one vote. As of the record date,             shares of Trane common stock were outstanding.

Vote Required. The affirmative vote of a majority of the shares of Trane common stock outstanding as of the record date is required to adopt the merger agreement. Acting upon any procedural matters incident to the conduct of the special meeting (including an adjournment of the special meeting) will require the affirmative vote of a majority of the shares of Trane common stock present or represented by proxy at the special meeting and entitled to vote on such matter.

Recommendation of Trane’s Board of Directors (Page 39)

On December 14, 2007, by unanimous vote, Trane’s board of directors:

 

   

determined the merger agreement and the merger to be advisable and fair to, and in the best interests of, Trane and its shareholders;

 

 

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approved the merger agreement and the merger; and

 

   

resolved to recommend that Trane shareholders vote in favor of adoption of the merger agreement.

Trane’s board of directors recommends a vote “FOR” adoption of the merger agreement.

Opinion of Lazard Frères & Co. LLC (Page 44)

On December 14, 2007, Trane's board of directors received an oral opinion from Lazard Frères & Co. LLC, which we refer to as Lazard, which oral opinion was subsequently confirmed by delivery to Trane’s board of directors of a written opinion dated December 15, 2007, to the effect that, as of the date of its opinion and subject to the matters described in its opinion, the (x) 0.23 of a Class A common share, par value $1.00 per share, of Ingersoll Rand and (y) $36.50 in cash, per share of Trane common stock (in each case, as may be adjusted in accordance with the merger agreement) to be paid to the holders of Trane’s common stock in the merger was fair, from a financial point of view, to such holders.

Lazard’s opinion does not address the relative merits of the merger as compared to any other transaction or business strategy in which Trane might engage or the merits of the underlying business decision by Trane to engage in the merger, and is not intended to and does not constitute a recommendation to any holder of Trane common stock as to how such holder should vote or act with respect to the merger or any matter relating thereto. We encourage you to read the opinion which is attached as Annex B to this proxy statement/prospectus and the section entitled “The Merger—Opinion of Lazard Frères & Co. LLC” beginning on page 44 carefully and in their entirety.

Interests of Certain Persons in the Merger (Page 53)

When considering the recommendation by Trane’s board of directors to vote “FOR” adoption of the merger agreement, you should be aware that certain directors and executive officers of Trane have interests in the merger that are different from, and may conflict with, your interests. Following the merger, two members of Trane's current board of directors, to be mutually agreed upon by Trane and Ingersoll Rand prior to the closing, will be appointed to the Ingersoll Rand board of directors, and, following the merger, Ingersoll Rand has agreed to take all actions that are necessary to ensure that the two Trane designees are nominated for election to the Ingersoll Rand board of directors at each of the 2008, 2009 and 2010 annual shareholders meetings of Ingersoll Rand. As of the date of this proxy statement/prospectus no determination has been made as to the identity of the two Trane designees that will be appointed to the Ingersoll Rand board of directors. In addition, while no determination has been made as of the date of this proxy statement/prospectus, certain executive officers of Trane may be offered positions with Ingersoll Rand effective upon completion of the merger.

In addition, the directors and executive officers of Trane will receive certain benefits upon completion of the merger, including accelerated vesting of Trane stock options and Trane restricted stock units. Trane’s executive officers and directors hold, in the aggregate, options for 8,378,608 shares of Trane common stock as of February 25, 2008 with an average exercise price of $18.73 per share, and 21,032 restricted stock units as of February 25, 2008, all of which will be fully vested upon completion of the merger. Based on an implied merger consideration of $47.81 per share (calculated using the closing trading price of Ingersoll Rand Class A common shares on December 14, 2007, the last trading day prior to the announcement of the merger), the difference between the implied value of the merger consideration and the weighted average exercise price of $18.73 per share of the Trane stock options held by directors and executive officers of Trane would be $29.08 per share (or approximately $243.6 million in the aggregate), and the aggregate value of the restricted stock units held by directors and executive officers of Trane would be approximately $1.0 million. In addition, certain executive officers will receive cash payments in the form of pro-rated annual and long-term bonus payments in an aggregate amount of approximately $6.73 million, assuming a closing date of May 31, 2008. Additionally, certain executive officers may be entitled to receive payments under Trane’s retention bonus program in connection with the merger, and certain executive officers will be entitled to receive severance payments and

 

 

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benefits in an aggregate amount of approximately $7.12 million in the event such officer’s employment is terminated at or following the merger. Ingersoll Rand has also agreed to continue certain indemnification and insurance arrangements for directors and executive officers of Trane following completion of the merger. Further, at the time the merger agreement was executed Mr. Poses entered into an agreement with Trane to extend his term as Chief Executive Officer for a period up to and including June 30, 2008.

Trane’s board of directors was aware of these interests and considered them in approving the merger agreement.

Regulatory Approvals (Page 61)

Under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and the rules and regulations promulgated thereunder, which we refer to as the HSR Act, the merger may not be completed until notification and report forms have been filed with the Antitrust Division of the U.S. Department of Justice and the U.S. Federal Trade Commission, and the applicable waiting period has expired or been terminated. On January 14, 2008, each of Trane and Ingersoll Rand filed its notification and report form under the HSR Act with the Antitrust Division of the U.S. Department of Justice and the U.S. Federal Trade Commission, and early termination of the applicable waiting period was granted on January 31, 2008.

The merger is also subject to, and the parties’ obligations to complete the merger are conditioned on, approval by governmental authorities in the European Union, China, Canada, South Africa and South Korea under the antitrust/competition laws of those jurisdictions. The competition filing required under the European Community Council Regulations was made by the parties on March 3, 2008. The competition filing required in China was made by the parties on February 2-3, 2008. The competition filing required in Canada was made by the parties on January 30, 2008, and clearance was granted on February 14, 2008. The competition filing required in South Africa was made by the parties on February 12, 2008. The competition filing required in South Korea was made by the parties on January 14, 2008, and clearance was granted on January 17, 2008. Finally, in connection with the merger but not as a condition to complete the merger, the parties have made competition filings as required under the laws of Mexico on February 8, 2008 and the laws of Brazil on January 8, 2008, and clearance was granted in Brazil on February 27, 2008.

Conditions to Completion of the Merger (Page 83)

Trane and Ingersoll Rand are obligated to complete the merger only if they satisfy, or in some cases, waive, several conditions, including the following:

 

   

the merger agreement has been adopted by the affirmative vote of holders of a majority of the outstanding shares of Trane common stock at the special meeting or an adjournment or postponement thereof;

 

   

the Ingersoll Rand Class A common shares to be issued to Trane shareholders have been approved for listing on the NYSE, subject to official notice of issuance;

 

   

the waiting period applicable to the merger under the HSR Act, and certain other applicable foreign antitrust and similar laws described above, has expired or has been terminated;

 

   

no temporary restraining order, preliminary or permanent injunction or other judgment, order or decree or statute, law, rule, legal restraint or prohibition is in effect that prevents the completion of the merger or makes illegal the consummation of the merger;

 

   

the registration statement on Form S-4, of which this proxy statement/prospectus forms a part, has been declared effective by the U.S. Securities and Exchange Commission, which we refer to in this proxy statement/prospectus as the SEC, and is not the subject of any stop order or proceedings seeking a stop order; and

 

   

the accuracy of representations and warranties and the performance of obligations under the merger agreement.

 

 

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No Solicitation by Trane (Page 78)

Subject to certain exceptions, the merger agreement provides that Trane shall not, and shall cause its subsidiaries not to, and shall use its reasonable best efforts to direct its and its subsidiaries’ directors, officers, employees, agents and representatives, including any investment banker, financial advisor, attorney, accountant or other advisor, agent, representative, not to, directly or indirectly, solicit, initiate or knowingly encourage or knowingly facilitate any “takeover proposal,” as defined in the merger agreement, or the making or consummation of any takeover proposal, or enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person any information in connection with, or otherwise knowingly cooperate in any way with, any takeover proposal.

Restrictions on Recommendation Withdrawal (Page 80)

The merger agreement generally restricts the ability of Trane’s board of directors to withdraw its recommendation that Trane shareholders adopt the merger agreement. However, if Trane's board of directors determines in good faith (after consultation with its outside counsel) that the failure to withdraw this recommendation could reasonably be determined to be inconsistent with its fiduciary duties under applicable law, then Trane’s board of directors may withdraw this recommendation.

Termination of the Merger Agreement (Page 84)

Ingersoll Rand and Trane may agree in writing to terminate the merger agreement at any time without completing the merger, even after the Trane shareholders have voted to adopt the merger agreement. The merger agreement may also be terminated at any time prior to the effective time of the merger in other specified circumstances, including:

 

   

by either Ingersoll Rand or Trane if:

 

   

the merger has not been completed on or before September 15, 2008, provided that a party will not have the right to terminate the merger agreement in this circumstance if a material breach of a representation, warranty or covenant in the merger agreement by such party has been a principal cause of the failure of the merger to be completed on or before September 15, 2008;

 

   

a governmental entity that must grant an approval of the merger that is required as a condition to closing has denied granting such approval and such denial has become final and non-appealable, or any governmental entity has issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the merger, and such order, decree, ruling or action shall have become final and non-appealable, provided that, in each case, the right to terminate the merger agreement in these circumstances will not be available to any party whose material breach of the merger agreement has been the principal cause of such governmental action;

 

   

the affirmative vote of holders of a majority of the outstanding shares of Trane common stock at the Trane special meeting or any adjournment or postponement thereof to adopt the merger agreement shall not have been obtained upon a vote taken thereon at the Trane special meeting duly convened therefor or at any adjournment or postponement of the special meeting; or

 

   

the other party breaches or fails to perform any representation, warranty, covenant or agreement set forth in the merger agreement which breach or failure to perform (i) would give rise to the failure of a closing condition regarding the accuracy of the other party’s representations and warranties or the other party’s compliance with its covenants and agreements and (ii) is incapable of being cured by the breaching party by September 15, 2008 or, if capable of being cured, was not cured by the breaching party within thirty calendar days following receipt of a written notice of breach or failure to perform from the non-breaching party; or

 

 

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by Ingersoll Rand if prior to the adoption of the merger agreement by Trane shareholders, (i) Trane’s board of directors has withdrawn, modified or qualified in a manner adverse to Ingersoll Rand its recommendation of the merger or Trane’s board of directors has approved, adopted or recommended or publicly proposed to approve, adopt or recommend, a takeover proposal (provided, that Ingersoll Rand’s right to terminate the merger agreement pursuant to clause (i) in circumstances not involving a superior proposal will terminate twenty business days after Trane’s board of directors takes the action specified in clause (i) above), (ii) a takeover proposal was publicly announced and Trane’s board of directors has failed to publicly reaffirm its recommendation of the merger agreement, the merger or the other transactions contemplated by the merger agreement within ten business days of a receipt of a written request to do so by Ingersoll Rand (provided, that Ingersoll Rand only has the right to request such reaffirmation, and Trane’s board of directors only has the obligation to make such public reaffirmation, on two occasions), or (iii) Trane has materially breached its obligations or agreements regarding the non-solicitation of takeover proposals, the procedures relating to the Trane board of directors’ ability to change its recommendation of the merger and terminate the merger agreement, or has materially breached its obligation regarding the delivery of this proxy statement/prospectus or the calling and holding of the special meeting of Trane shareholders to adopt the merger agreement (excluding, in each case, inadvertent breaches or failures that are capable of being cured and that are cured within two business days following receipt of a written notice of such breach or failure from Ingersoll Rand);

 

   

by Trane, prior to the adoption of the merger agreement by Trane shareholders, in connection with a superior proposal (as defined in the merger agreement); or

 

   

by Trane if all of the conditions to Ingersoll Rand’s obligations to consummate the merger have been satisfied (other than those conditions that by their nature are to be satisfied by actions taken at the closing, provided that such conditions are capable of being satisfied) and Ingersoll Rand has failed to consummate the merger within ten business days after satisfaction of such conditions.

Termination Fee (Page 86)

In connection with the termination of the merger agreement in certain circumstances involving a takeover proposal by a third party or a change in Trane’s board of directors recommendation of the merger to Trane’s shareholders, Trane may be required to pay Ingersoll Rand a termination fee of $315,000,000.

Material United States Federal Income Tax Consequences (Page 62)

Generally, gains arising from receipt of the merger consideration, including the stock portion of the merger consideration, will be taxable to Trane’s shareholders for United Stated federal income tax purposes.

Differences Between the Rights of Trane and Ingersoll Rand Shareholders (Page 109)

As a result of the merger, the holders of Trane common stock will become holders of Ingersoll Rand Class A common shares. Following the merger, Trane shareholders will have different rights as shareholders of Ingersoll Rand than as shareholders of Trane due to differences between the laws of the jurisdictions of incorporation and the different provisions of the governing documents of Trane and Ingersoll Rand.

Ability to Demand Appraisal Rights (Page 64)

Under Delaware law, Trane shareholders of record who do not vote in favor of the merger will be entitled to exercise appraisal rights and obtain payment in cash for the judicially-determined fair value of their shares of Trane common stock in connection with the merger if the merger is completed. The relevant provisions of the General Corporation Law of the State of Delaware, which we refer to as the DGCL, are included as Annex C to this proxy statement/prospectus.

 

 

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Listing of Ingersoll Rand Class A Common Shares on the NYSE (Page 67)

Ingersoll Rand Class A common shares received by Trane shareholders in the merger will be listed on the NYSE under the symbol “IR.” After completion of the merger, Ingersoll Rand Class A common shares will continue to be traded on the NYSE, but shares of Trane common stock will no longer be listed or traded on the NYSE.

 

 

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COMPARATIVE PER SHARE DATA

The following table presents certain per share data of Trane and Ingersoll Rand on a historical basis and on an unaudited pro forma basis after giving effect to the merger as if the merger had occurred at December 31, 2007 for the balance sheet data and at January 1, 2007 for the income statement data. The following information should be read in conjunction with the audited consolidated financial statements of Trane and Ingersoll Rand, which are incorporated by reference into this proxy statement/prospectus, and the unaudited pro forma combined condensed financial statements beginning on page 92. The unaudited pro forma information below is presented for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the merger had been completed as of the periods presented, nor is it necessarily indicative of the future operating results or financial position of the combined company. In addition, the unaudited pro forma financial statement information does not purport to indicate balance sheet data or results of operations data as of any future date or for any future period.

 

     As of and for the
Year Ended

December 31, 2007

Ingersoll Rand—Historical Per Common Share

  

Dilutive earnings per common share from continuing operations

   $ 2.48

Dividends declared per common share

     0.72

Book value per common share

     29.01

Trane—Historical Per Common Share

  

Dilutive earnings per common share from continuing operations

     1.96

Dividends declared per common share

     0.68

Book value per common share

     2.77

Ingersoll Rand Unaudited Pro Forma Combined(1)

  

Unaudited pro forma per Ingersoll Rand common share:

  

Dilutive earnings per common share from continuing operations

     2.41

Book value per common share

     31.86

Unaudited Pro Forma Trane Equivalents(2)

  

Unaudited pro forma per Trane common share:

  

Dilutive earnings per common share from continuing operations

     0.55

Book value per common share

     7.33

 

(1) Were Ingersoll Rand to increase the amount of cash paid per share by $1.00, based on a $44.78 price per Ingersoll Rand Class A common share, the exchange ratio would be reduced to 0.21 (assuming an Ingersoll Rand Reference Price of $44.78), and the unaudited pro forma combined book value per common share as of December 31, 2007 would decrease by approximately $0.18. The Trane equivalent per share amounts would be computed by multiplying amounts by 0.21. The impact on pro forma earnings per share amounts would be approximately 1%.

 

(2) The unaudited pro forma Trane equivalent per share amounts are calculated by multiplying the pro forma combined dilutive earnings per common share from continuing operations and book value per common share by the exchange ratio of 0.23.

 

 

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COMPARATIVE PER SHARE MARKET PRICE DATA AND DIVIDEND INFORMATION

Trane’s common stock is listed and traded on the NYSE under the symbol “TT.” Ingersoll Rand’s Class A common shares are listed and traded on the NYSE under the symbol “IR.” The following table sets forth, for the calendar quarters indicated, the high and low sales prices per share of Trane common stock and the high and low sales prices of Ingersoll Rand Class A common shares, in each case as reported on the NYSE, as adjusted for all stock splits or stock dividends. In addition, the table also sets forth the quarterly cash dividends per share declared by Trane and Ingersoll Rand with respect to their common stock and common shares, respectively. On                     , 2008, the record date for the special meeting, there were approximately              million shares of Trane common stock outstanding.

 

     Trane Inc.        Ingersoll-Rand Company Limited    
     High    Low    Dividends
Paid
   High    Low    Dividends
Paid

For the quarterly period ended:

                 

2006

                 

March 31, 2006

   $ 43.70    $ 35.01    $ 0.18    $ 44.50    $ 36.92    $ 0.16

June 30, 2006

   $ 47.14    $ 38.57    $ 0.18    $ 49.00    $ 38.75    $ 0.16

September 30, 2006

   $ 44.14    $ 37.71    $ 0.18    $ 43.32    $ 34.95    $ 0.18

December 31, 2006

   $ 46.81    $ 41.59    $ 0.18    $ 41.75    $ 35.84    $ 0.18

2007

                 

March 31, 2007

   $ 55.30    $ 45.21    $ 0.18    $ 45.62    $ 38.25    $ 0.18

June 30, 2007

   $ 61.23    $ 51.76    $ 0.18    $ 56.63    $ 43.39    $ 0.18

September 30, 2007(1)

   $ 63.74    $ 32.35    $ 0.16    $ 56.66    $ 44.52    $ 0.18

December 31, 2007

   $ 46.74    $ 32.09    $ 0.16    $ 55.94    $ 42.94    $ 0.18

2008

                 

March 31, 2008 (through March 3, 2008)

   $ 46.61    $ 43.00    $ 0.16    $ 46.57    $ 34.46    $ 0.18

 

(1) As part of the planned separation announced by Trane on February 1, 2007, Trane entered into an agreement to sell its former Bath and Kitchen business on July 23, 2007 (which sale was subsequently completed on October 31, 2007) and completed the spin-off of its former Vehicle Control Systems business, known as WABCO, on July 31, 2007. The market prices for Trane’s shares of common stock provided in the table above include the value of the Bath and Kitchen business and Vehicle Control Systems business through the date of the announced sale and spin-off. The spin-off of WABCO was effected through a dividend of all WABCO common stock to holders of Trane common stock, in which holders of Trane common stock received one share of WABCO common stock for every three shares of Trane common stock owned. On July 31, 2007, the last trading day prior to the completion of the spin-off of WABCO, the closing price per share of Trane common stock was $54.05. On August 1, 2007, the first trading day after the completion of the spin-off of WABCO, the closing price per share of Trane common stock was $37.99 and the closing price per share of WABCO common stock was $49.00. As a result of the one-for-three ratio used in the spin-off, on the close of business on August 1, 2007, the first trading day after the completion of the spin-off of WABCO, the per-share combined value of Trane common stock and WABCO common stock was $54.32.

 

 

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Future dividends on Ingersoll Rand’s Class A common shares, if any, will be at the discretion of its board of directors and will depend on, among other things, Ingersoll Rand’s results of operations, cash requirements and surplus, financial condition, contractual restrictions and other factors that the board of directors of Ingersoll Rand may deem relevant, as well as Ingersoll Rand’s ability to pay dividends in compliance with the Companies Act 1981 of Bermuda, as amended. Pursuant to such Act, Ingersoll Rand may not declare or pay a dividend, or make a distribution out of contributed surplus, if there are reasonable grounds for believing that (i) Ingersoll Rand is, or would be after the payment, unable to pay its liabilities as they become due; or (ii) the realizable value of its assets would thereby be less than the aggregate of its liabilities and issued share capital and share premium accounts.

Under the merger agreement, Trane has agreed to coordinate with Ingersoll Rand regarding the declaration of any dividends with respect to Trane common stock to ensure that the Trane shareholders will not receive more than one dividend, or fail to receive a dividend, for any single calendar quarter on their shares of Trane common stock (or Ingersoll Rand Class A common shares received in exchange therefor in the merger).

The following table presents:

 

   

the last reported sale price of a share of Trane’s common stock, as reported on the NYSE; and

 

   

the last reported sale price of an Ingersoll Rand Class A common share, as reported on the NYSE;

in each case, on December 14, 2007, the last full trading day prior to the public announcement of the proposed merger, and on                     , 2008, the last practicable trading day prior to the date of this proxy statement/prospectus. The following table also presents the equivalent value of the merger consideration per share of Trane common stock on those dates:

 

     Ingersoll Rand
Common Stock
   Trane
Common Stock
   Equivalent Price Per Share of
Trane Common Stock(1)

December 14, 2007

   $ 49.18    $ 37.20    $ 47.81

                      , 2008

   $      $      $  

 

(1) Calculated by adding (a) the cash portion of the merger consideration, or $36.50, and (b) the Ingersoll Rand closing per share stock price multiplied by the exchange ratio of 0.23.

The market value of the Ingersoll Rand Class A common shares to be issued in exchange for shares of Trane common stock upon the completion of the merger will not be known at the time Trane shareholders vote on the proposal to adopt the merger agreement. The above tables show only historical comparisons. Because the market prices of Ingersoll Rand Class A common shares and Trane common stock will likely fluctuate prior to the merger, these comparisons may not provide meaningful information to Trane’s shareholders in determining whether to adopt the merger agreement. Trane’s shareholders are encouraged to obtain current market quotations for Ingersoll Rand’s Class A common shares and to review carefully the other information contained in this proxy statement/prospectus or incorporated by reference into this proxy statement/prospectus in considering whether to adopt the merger agreement. See “Where You Can Find More Information” beginning on page 124.

 

 

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SELECTED HISTORICAL FINANCIAL AND OTHER DATA OF INGERSOLL RAND

The selected historical financial data of Ingersoll Rand for each of the years ended December 31, 2007, 2006 and 2005 and as of December 31, 2007 and 2006 have been derived from the audited consolidated financial statements of Ingersoll Rand incorporated by reference in this proxy statement/prospectus. The selected historical financial data for the years ended December 31, 2004 and 2003 and as of December 31, 2005, 2004 and 2003 have been derived from the unaudited consolidated financial statements of Ingersoll Rand, none of which have been included in this proxy statement/prospectus. You should read the following information together with Ingersoll Rand’s consolidated financial statements, the notes related thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Ingersoll Rand’s Annual Report on Form 10-K for the year ended December 31, 2007, which is incorporated by reference in this proxy statement/prospectus.

 

(In millions, except per share amounts)

At and for the years ended December 31,

   2007    2006    2005    2004    2003

Net revenues

   $ 8,763.1    $ 8,033.7    $ 7,263.7    $ 6,663.2    $ 6,083.4

Earnings from continuing operations

     733.1      765.0      731.8      554.2      362.5

Earnings from discontinued operations

     3,233.6      267.5      322.4      664.5      282.0

Total assets

     14,376.2      12,145.9      11,756.4      11,414.6      10,664.9

Total debt

     1,453.7      1,984.6      2,117.0      1,880.4      2,315.4

Shareholders’ equity

     7,907.9      5,404.8      5,761.9      5,733.8      4,493.3

Basic earnings per common share:

              

Continuing operations

   $ 2.52    $ 2.39    $ 2.17    $ 1.60    $ 1.06

Discontinued operations

     11.12      0.84      0.95      1.92      0.82

Diluted earnings per common share:

              

Continuing operations

   $ 2.48    $ 2.37    $ 2.14    $ 1.58    $ 1.05

Discontinued operations

     10.95      0.83      0.95      1.89      0.82

Dividends per common share

   $ 0.72    $ 0.68    $ 0.57    $ 0.44    $ 0.36

 

1. Earnings and dividends per common share amounts have been restated to reflect a two-for-one stock split that occurred in August 2005.
2. 2006-2003 amounts have been restated to reflect the Bobcat, Utility Equipment, Attachments and Road Development business units as discontinued operations.

 

 

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SELECTED HISTORICAL FINANCIAL AND OTHER DATA OF TRANE

The selected historical financial data of Trane for each of the years ended December 31, 2007, 2006 and 2005 and as of December 31, 2007 and 2006 have been derived from the audited consolidated financial statements of Trane incorporated by reference in this proxy statement/prospectus. The selected historical financial data for the years ended December 31, 2004 and 2003 and as of December 31, 2005, 2004 and 2003 have been derived from the unaudited consolidated financial statements of Trane, none of which have been included in this proxy statement/prospectus. You should read the following information together with Trane’s consolidated financial statements, the notes related thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Trane’s Annual Report on Form 10-K for the year ended December 31, 2007, which is incorporated by reference in this proxy statement/prospectus.

 

     Year Ended December 31,
      2007    2006     2005     2004     2003
     (In millions, except per share data)

Income Statement Data:

           

Sales

   $ 7,449.6    $ 6,758.1     $ 6,014.7     $ 5,345.5     $ 4,974.6

Cost of sales

     5,331.9      4,796.1       4,308.9       3,872.5       3,778.1

Selling and administrative expenses

     1,400.2      1,312.0       1,191.2       1,070.8       791.9
                                     

Operating income

     717.5      650.0       514.6       402.2       404.6

Other (income) expense(a)

     5.5      (8.2 )     (13.5 )     (10.0 )     10.6

Asbestos indemnity, net of recoveries(b)

     —        —         —         320.2       10.0

Interest expense

     109.6      114.6       113.3       106.2       108.1
                                     

Income (loss) from continuing operations before income taxes(c)

     602.4      543.6       414.8       (14.2 )     275.9

Income tax expense (benefit)(c)

     202.2      157.7       95.6       (11.7 )     62.3
                                     

Income (loss) from continuing operations(c)

   $ 400.2    $ 385.9     $ 319.2     $ (2.5 )   $ 213.6
                                     

Per Share Data:

           

Income (loss) from continuing operations

           

Basic

   $ 2.01    $ 1.91     $ 1.51     $ (0.01 )   $ 0.99

Diluted

   $ 1.96    $ 1.87     $ 1.47     $ (0.01 )   $ 0.97

Weighted-average common shares outstanding:

           

Basic

     199.0      201.7       211.3       214.8       216.8

Diluted

     204.5      206.3       217.0       220.6       221.2

Balance Sheet Data (at end of period):

           

Total assets

   $ 5,097.3    $ 7,422.5     $ 6,867.8     $ 6,841.8     $ 5,878.7

Total debt

   $ 1,059.5    $ 1,715.4     $ 1,696.2     $ 1,507.9     $ 1,679.1

Cash dividends per common share

   $ 0.68    $ 0.72     $ 0.60     $ —       $ —  

In 2007, Trane completed the spinoff of its Vehicle Control Systems business and sold its Bath and Kitchen business. Accordingly, the operating results of these two businesses are reported as discontinued operations for all periods.

 

(a) In 2007, other (income) expense includes separation and merger advisory fees of $10.0 million ($8.0 million after tax, or $0.04 per diluted share), primarily related to the planned merger with Ingersoll Rand. Other (income) expense from continuing operations in 2006 also included a gain of $15.4 million ($13.8 million, after tax, $.07 per diluted share) related to the sale of operations in Australia.

 

 

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(b) In the fourth quarter of 2004, Trane recorded a $307 million ($188 million, net of tax benefit, or $0.85 per diluted share) charge covering estimated net payments for pending and future asbestos-related claims. For a detailed description of the asbestos indemnity matter, see Note 15 of the notes to Trane’s consolidated financial statements contained in Trane’s Annual Report on Form 10-K for the year ended December 31, 2007, which is incorporated by reference in this proxy statement/prospectus.

 

(c) In 2007, income from continuing operations includes $2.6 million ($2.0 million after tax, or $0.01 per diluted share) of expenses related to operational consolidation expenses, primarily for the elimination of 25 jobs and other charges associated with plans initiated throughout 2007 to streamline manufacturing and administrative processes. Income taxes include a tax benefit of $0.6 million related to those expenses. The income tax provision included net tax benefits of $4.5 million ($0.02 per diluted share), which includes benefits associated with foreign audit settlements, the expiration of statute of limitations and adjustments of the 2006 tax provision to the final filed tax returns. The combined effect of the net tax benefits that occurred in 2007, together with other ongoing tax planning activities, resulted in an effective income tax rate of 33.6 percent for the year. In 2006, income from continuing operations includes $2.1 million ($1.4 million after tax, or $0.01 per diluted share) of expenses related to operational consolidation expenses, primarily for the elimination of 42 jobs and other charges associated with plans initiated throughout 2006 to streamline manufacturing and administrative processes. Income taxes include a tax benefit of $0.7 million related to those expenses. The income tax provision included $19.9 million of benefits ($0.10 per diluted share) during 2006 primarily related to the reduction of a tax contingency as a result of an expiring statute of limitations in a jurisdiction outside the United States and amounts principally related to adjustments to the 2005 tax provision to agree to the final 2005 tax returns. The combined effect of the tax benefits that occurred in 2006, together with other ongoing tax planning activities, resulted in an effective income tax rate of 29.0 percent for the year. In 2005, income from continuing operations includes $25.8 million ($17.5 million after tax, or $.08 per diluted share) of expenses related to operational consolidation expenses, primarily for the elimination of 458 jobs and other charges associated with plans initiated throughout 2005 to streamline manufacturing and administrative processes as well as a facility shut down. Income taxes include a tax benefit of $8.3 million related to those expenses. The income tax provision for 2005 also included benefits of $53.1 million ($0.24 per diluted share) from the resolution of tax audits and adjustments of the 2004 tax provision to the final filed tax returns. The combined effect of the tax benefits that occurred in 2005, together with other ongoing tax planning activities, reduced the effective income tax rate to 23.0 percent for the year. In 2004, income from continuing operations includes $7.7 million ($4.9 million after tax, or $0.02 per diluted share) of expenses related to operational consolidation expenses, which included the elimination of 205 jobs during 2004. Income taxes include a tax benefit of $2.8 million related to those expenses. Income taxes in 2004 include a $6.4 million tax benefit ($0.03 per diluted share) from the resolution of tax audits, and a reduction in withholding tax liabilities resulting from the decision not to distribute earnings of certain foreign subsidiaries. In 2003 income from continuing operations include expenses of $8.4 million ($5.4 million after tax, or $0.02 per diluted share) that included the elimination of 234 jobs. Income taxes include a tax benefit of $3.0 million related to those expenses. Income taxes in 2003 include a $19.6 million tax benefit ($0.09 per diluted share) principally because of the resolution of audits and approval of claims for research and development tax credits.

 

 

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SELECTED UNAUDITED COMBINED CONDENSED PRO FORMA FINANCIAL DATA OF INGERSOLL RAND

The following table sets forth certain selected unaudited pro forma combined condensed financial data of Ingersoll Rand after giving effect to the merger as if the merger occurred at December 31, 2007 for balance sheet data and at January 1, 2007 for income statement data. See “Unaudited Pro Forma Combined Condensed Financial Data of Ingersoll Rand” beginning on page 92.

The unaudited pro forma financial data in the table below should be read in conjunction with the historical financial statements and accompanying disclosures of Ingersoll Rand and Trane, which are incorporated by reference in this proxy statement/prospectus, and the unaudited pro forma combined condensed financial statements and accompanying disclosures beginning on page 92. The unaudited pro forma combined condensed financial statements are provided for informational purposes only and are not necessarily indicative of the operating results or financial position that would have occurred if the merger had been completed as of the periods presented, nor is it necessarily indicative of the future results or financial position of the combined company. In addition, the unaudited pro forma financial statement information does not purport to indicate balance sheet data or results of operations data as of any future date or for any future period.

 

     December 31, 2007  
     (in millions)  

Statement of Income Data (for the year ended)

  

Net revenues

   $ 16,212.7  

Cost of goods sold

     (11,631.5 )

Selling and administrative expenses

     (2,945.8 )
        

Operating income

     1,635.4  

Interest expense

     (572.1 )

Other income (expense), net

     10.4  
        

Earnings from continuing operations before income taxes

     1,073.7  

Provision for income taxes

     (243.4 )
        

Earnings from continuing operations

   $ 830.3  
        

Balance Sheet Data (as of the end of the period)

  

Working capital

   $ (2,049.8 )

Total assets

     27,745.1  

Total debt

     7,336.2  

Shareholders’ equity

     10,113.5  

 

 

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RISK FACTORS

In addition to the other information included or incorporated by reference in this proxy statement/ prospectus, you should carefully consider the matters described below in evaluating whether to adopt the merger agreement.

Risk Factors Relating to the Merger

Because the market price of Ingersoll Rand Class A common shares will fluctuate, you cannot be sure of the market value of the shares of Ingersoll Rand Class A common shares that you will receive.

The number of Ingersoll Rand Class A common shares to be received by holders of Trane common stock in the merger as part of the merger consideration is fixed at 0.23 of an Ingersoll Rand Class A common share for each share of Trane common stock. That number will not be adjusted in the event of any increase or decrease in the price of either Ingersoll Rand Class A common shares or Trane common stock. That number would be reduced, however, if Ingersoll Rand substitutes up to $1.00 per share in cash for a portion of the stock consideration having an equivalent value (based on the Ingersoll Rand Reference Price) as the amount of the increase in cash, under the circumstances described under “The Merger—General” beginning on page 30. The price of Ingersoll Rand Class A common shares may vary at the effective time of the merger from its price at the date of this proxy statement/prospectus and at the date of the special meeting. That variation may be the result of changes in the business, operations or prospects of Ingersoll Rand or Trane, market assessments of the likelihood that the merger will be completed and the timing of the merger, regulatory considerations, general market and economic conditions and other factors. In addition to the approval of Trane shareholders, completion of the merger is subject to the expiration or termination of the applicable waiting period, and any extension of the waiting period, under the HSR Act and certain other applicable foreign antitrust and similar laws of certain foreign jurisdictions, and the satisfaction of other conditions that may not occur until some time after the special meeting. On January 31, 2008, early termination of the applicable waiting period under the HSR Act was granted, and on February 14, 2008 clearance under the competition law of Canada was received. At the time of the special meeting you will not know the precise dollar value of the merger consideration you will be entitled to receive upon completion of the merger or whether Ingersoll Rand will substitute up to $1.00 per share in cash for shares having an equivalent value (based on the Ingersoll Rand Reference Price). A vote by Trane shareholders for the adoption of the merger agreement constitutes approval of the merger whether or not Ingersoll Rand substitutes up to $1.00 per share in cash for a portion of the stock consideration having an equivalent value (based on the Ingersoll Rand Reference Price). Trane shareholders are urged to obtain current market quotations for Ingersoll Rand Class A common shares and Trane common stock.

The failure to successfully integrate Trane’s business and operations in the expected time frame may adversely affect Ingersoll Rand’s future results.

The success of the merger will depend, in part, on the combined company’s ability to realize the anticipated benefits from combining the businesses of Ingersoll Rand and Trane. However, to realize these anticipated benefits, the businesses of Ingersoll Rand and Trane must be successfully combined. If the combined company is not able to achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected.

Ingersoll Rand and Trane have operated and, until the completion of the merger, will continue to operate independently. It is possible that the integration process could result in the loss of key employees, as well as the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies. Any or all of those occurrences could adversely affect Ingersoll Rand’s ability to maintain relationships with customers and employees after the merger or to achieve the anticipated benefits of the merger. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on each of Ingersoll Rand and Trane.

 

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Trane will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on Trane and consequently on Ingersoll Rand. These uncertainties may impair Trane’s ability to retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with Trane to defer purchases or other decisions concerning Trane or seek to change existing business relationships with Trane. If key employees depart because of uncertainty about their future roles and the potential complexities of integration, the combined company’s business following the merger could be harmed. In addition, the merger agreement restricts Trane from making certain acquisitions and taking other specified actions without the consent of Ingersoll Rand until the merger occurs. These restrictions may prevent Trane from pursuing attractive business opportunities that may arise prior to the completion of the merger. Please see the section entitled “The Merger Agreement—Covenants and Agreements” beginning on page 74 of this proxy statement/prospectus for a description of the restrictive covenants applicable to Trane.

The market price for Ingersoll Rand Class A common shares may be affected by factors different from those affecting the shares of Trane.

Upon completion of the merger, holders of Trane common stock will become holders of Ingersoll Rand Class A common shares. Ingersoll Rand’s businesses differ from those of Trane, and accordingly the results of operations of the combined company will be affected by factors different from those currently affecting the results of operations of Trane. For a discussion of the businesses of Ingersoll Rand and Trane and of certain factors to consider in connection with those businesses, see the documents incorporated by reference in this proxy statement/prospectus and referred to under “Where You Can Find More Information” beginning on page 124.

Some directors and executive officers of Trane have interests in the merger that may differ from the interests of Trane stockholders.

When considering the recommendation by Trane’s board of directors to vote “FOR” adoption of the merger agreement, you should be aware that certain directors and executive officers of Trane have interests in the merger agreement that are different from, and may conflict with, your interests. Following the merger two current directors of Trane, to be mutually agreed by Ingersoll Rand and Trane prior to the closing, will be appointed members of the Ingersoll Rand board of directors and, following the merger, Ingersoll Rand has agreed to take all actions necessary to ensure that those individuals are nominated for election to the Ingersoll Rand board of directors at each of the 2008, 2009 and 2010 Ingersoll Rand annual shareholders meetings. As of the date of this proxy statement/prospectus, no determination has been made as to the identity of the two Trane designees that will be appointed to the Ingersoll Rand board of directors. The directors and executive officers of Trane will receive certain benefits upon completion of the merger, including accelerated vesting of stock options and restricted stock. Additionally, certain executive officers may be entitled to receive severance payments in connection with the merger in an aggregate amount of approximately $7.12 million and performance bonuses in an aggregate amount of approximately $6.73 million. Ingersoll Rand has agreed to continue certain indemnification arrangements for directors and executive officers of Trane. Trane’s board of directors was aware of these interests and considered them in approving the merger agreement. Please see the section entitled “The Merger—Interests of Certain Persons in the Merger” beginning on page 53 of this proxy statement/prospectus for a further description of these interests.

The Ingersoll Rand Class A common shares to be received by Trane stockholders as a result of the merger will have different rights from the shares of Trane common stock.

Following completion of the merger, Trane stockholders will no longer be stockholders of Trane, a Delaware corporation, but will instead be shareholders of Ingersoll Rand, a Bermuda company. There will be important differences between your current rights as a Trane stockholder and the rights to which you will be entitled as a shareholder of Ingersoll Rand. See “Comparative Rights of Ingersoll Rand Shareholders and Trane Shareholders” beginning on page 109 of this proxy statement/prospectus for a discussion of the different rights associated with Ingersoll Rand Class A common shares.

 

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Failure to complete the merger could negatively impact the stock prices and future business and financial results of Ingersoll Rand and Trane.

If the merger is not completed, the ongoing businesses of Ingersoll Rand or Trane may be adversely affected and Ingersoll Rand and Trane will be subject to several risks, including the following: (i) Trane being required, under certain circumstances, to pay Ingersoll Rand a termination fee of $315 million under the merger agreement; (ii) Trane and Ingersoll Rand having to pay certain costs relating to the merger, such as legal, accounting, financial advisor and printing fees; and (iii) the focus of management of each of the companies on the merger instead of on pursuing other opportunities that could be beneficial to the companies, in each case, without realizing any of the benefits of having the transaction completed. In addition, if the merger is not consummated, Ingersoll Rand and Trane may experience negative reactions from the financial markets and Ingersoll Rand’s and Trane’s customers and employees. If the merger is not completed, Ingersoll Rand and Trane cannot assure their stockholders that the risks described above will not materialize and will not materially affect the business, financial results and stock prices of Ingersoll Rand or Trane.

Risk Factors Relating to Ingersoll Rand and Trane

Ingersoll Rand’s and Trane’s businesses are and will be subject to the risks described above relating to the merger. In addition, Ingersoll Rand and Trane are, and will continue to be, subject to the risks described in Part I, Item 1A in each of Ingersoll Rand’s annual report on Form 10-K for the year ended December 31, 2007 and Trane’s annual report on Form 10-K for the year ended December 31, 2007, in each case as filed with the SEC and incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 124 for the location of information incorporated by reference into this proxy statement/prospectus.

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

Some of the statements contained or incorporated by reference in this proxy statement/prospectus, including those relating to Ingersoll Rand’s and Trane’s strategies and other statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “will,” “should,” “may,” expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” and similar expressions, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include the information concerning possible or assumed future results of operations of Ingersoll Rand and Trane as set forth under “The Merger—Ingersoll Rand’s Reasons for the Merger,” “The Merger—Recommendation of Trane's Board of Directors; Reasons for the Merger,” “The Merger—Opinion of Lazard Frères & Co. LLC,” and “The Merger—Financial Projections.” These statements are not historical facts but instead represent only Ingersoll Rand’s and Trane’s expectations, estimates and projections regarding future events. These statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, which may include the risk factors set forth above and other market, business, legal and operational uncertainties discussed elsewhere in this document and the documents which are incorporated herein by reference. Those uncertainties include, but are not limited to:

 

   

the risk of failure to satisfy any of the conditions of closing, including the failure to obtain Trane stockholder approval;

 

   

the risks that Ingersoll Rand’s and Trane’s businesses will not be integrated successfully;

 

   

the risk that Ingersoll Rand and Trane will not realize estimated cost savings and synergies;

 

   

costs related to the proposed transaction;

 

   

potential disruption from the transaction making it more difficult to maintain relationships with customers, employees, distributors or suppliers;

 

   

the level of end-market activity in Ingersoll Rand’s and Trane’s commercial and residential markets;

 

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weather conditions that could negatively or positively affect business and results of operations;

 

   

additional developments which may occur that could affect Ingersoll Rand’s or Trane’s estimate of asbestos liabilities and recoveries;

 

   

unpredictable difficulties or delays in the development of new product technology;

 

   

fluctuations in pricing of products, the competitive environment and related market conditions;

 

   

changes in law or different interpretations of laws that may affect Trane’s or Ingersoll Rand’s expected effective tax rate;

 

   

increased regulation and related litigation;

 

   

access to capital;

 

   

risks associated with the ongoing obligations of Trane resulting from the completion of its separation plan, including potential post-closing purchase price adjustments and potential indemnification claims by the purchasers of Trane’s Bath and Kitchen business or by WABCO Holdings, Inc., and the ability of such parties to satisfy, when due, the obligations assumed by such parties in connection therewith, including, without limitation, the obligations of WABCO and its subsidiaries under the Indemnification Agreement relating to the potential fines imposed in connection with the European Commission Investigation described in further detail in Trane’s Annual Report on Form 10-K for the year ended December 31, 2007, which is incorporated by reference in this proxy statement/prospectus; and

 

   

actions of domestic and foreign governments.

Additional factors that could cause Ingersoll Rand’s and Trane’s results to differ materially from those described in the forward-looking statements can be found in the 2007 Annual Report on Form 10-K of Ingersoll Rand and the 2007 Annual Report on Form 10-K of Trane filed with the Securities and Exchange Commission and available at the SEC’s Internet site (http://www.sec.gov). Neither Ingersoll Rand nor Trane undertakes any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made.

 

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THE TRANE SPECIAL MEETING

General

The special meeting will be held on                     , 2008, at         a.m., local time, at the Trane Learning Center, One Centennial Avenue, Piscataway, New Jersey.

The purposes of the special meeting are to consider and vote upon the adoption of the merger agreement, dated as of December 15, 2007, among Trane, Ingersoll Rand, and Indian Merger Sub, Inc., a wholly-owned subsidiary of Ingersoll Rand, and to consider and vote upon any procedural matters incident to the conduct of the special meeting, such as adjournment of the special meeting, including any adjournment for the purpose of soliciting additional proxies.

TRANE’S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE MERGER AGREEMENT AND MERGER ARE ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF, TRANE AND ITS SHAREHOLDERS AND RECOMMENDS THAT TRANE SHAREHOLDERS VOTE “FOR” THE PROPOSAL TO ADOPT THE MERGER AGREEMENT.

Record Date; Voting Information; Required Vote

Trane’s board of directors has fixed the close of business on                     , 2008 as the record date for determining the holders of Trane common stock entitled to notice of, and to vote at, the special meeting. Only holders of record of Trane common stock at the close of business on the record date will be entitled to notice of, and to vote at, the special meeting or any adjournment or postponement of the special meeting.

As of the record date,             shares of Trane common stock were issued and outstanding and entitled to vote at the special meeting and there were approximately             holders of record of Trane common stock. Each share of Trane common stock entitles the holder to one vote on each matter to be considered at the special meeting. If you are a record holder of Trane common stock, you may vote your shares of Trane common stock in person at the special meeting or by proxy as described below under “—Voting by Proxy; Revocation of Proxies.”

The presence in person or by proxy at the special meeting of the holders of at least a majority of the outstanding shares of Trane common stock entitled to vote at the meeting will constitute a quorum for the special meeting. Properly signed proxies that are marked “abstain” are known as abstentions. Properly signed proxies that are held by brokers in street name on behalf of customers who have not provided their broker with specific voting instructions on nonroutine matters such as the proposal to adopt the merger agreement are known as broker non-votes. Abstentions and broker non-votes will be counted for the purposes of determining whether a quorum exists at the special meeting but will have the same effect as a vote against the proposal to adopt the merger agreement.

The affirmative vote of a majority of the shares of Trane common stock outstanding as of the record date is required to adopt the merger agreement. Acting upon any procedural matters incident to the conduct of the special meeting (including an adjournment of the special meeting) will require the affirmative vote of a majority of the shares of Trane common stock present or represented by proxy at the special meeting and entitled to vote on such matter.

Trane does not expect that any matter other than the proposals listed above will be brought before the special meeting. If, however, other matters are properly brought before the special meeting, or any adjournment of the special meeting, the persons named as proxies will vote in accordance with their judgment.

Voting by Proxy; Revocation of Proxies

Each copy of this proxy statement/prospectus mailed to Trane shareholders is accompanied by a form of proxy and a self-addressed postage pre-paid envelope.

If you are a registered shareholder (that is, if you hold your Trane common stock in certificate form or you hold shares directly through book-entry registration) you should either complete and return the proxy card accompanying

 

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this proxy statement/prospectus, or submit a proxy by telephone or through the Internet by following the instructions included with your proxy card, in each case, to ensure that your vote is counted at the special meeting, or at any adjournment or postponement of the special meeting, regardless of whether you plan to attend the special meeting.

If you are a participant in the Trane Employee Stock Ownership Plan (the “ESOP”), the Trane Savings Plan (the “Savings Plan”) or the Trane 401(k) and Thrift Plan (the “Thrift Plan”), you will receive one proxy card for all Trane shares allocated to your ESOP, Savings Plan and Thrift Plan accounts. The proxy card will serve as a voting instruction card for the trustee of the ESOP, the Savings Plan and the Thrift Plan. If you do not vote your Trane shares, the ESOP trustee will vote your ESOP shares in the same proportion as shares for which instructions were received under the ESOP. Similarly, unvoted Trane shares held through the Savings Plan will be voted by the Savings Plan trustee in the same proportion as Trane shares for which instructions were received under the Savings Plan and unvoted Trane shares in the Thrift Plan will be voted by the Thrift Plan trustee in the same proportion as Trane shares for which instructions were received under the Thrift Plan. Many of Trane’s current employees and any former employees holding Trane shares in employee plans who have chosen to do so will receive their proxy card and proxy statement electronically by e-mail. If you hold Trane shares other than through the ESOP, Savings Plan or Thrift Plan, you will receive a separate set of materials, including a separate proxy card and control number, to vote those Trane shares.

You should vote any shares held in a Trane Employee Stock Purchase Plan account by completing the materials sent to you by the custodian for that account. If you do not respond to these materials and properly give your custodian voting instructions, the custodian generally will not have discretion to vote the shares on your behalf. Because the adoption of the merger agreement requires an affirmative vote of a majority of the outstanding shares of Trane common stock as of the close of business on the record date, failure to instruct your custodian how to vote any shares held by you in the Trane Employee Stock Purchase Plan account will have the same effect as votes cast against the merger agreement.

If a broker, bank or other nominee holds shares of common stock for your benefit, and the shares are not in your name on Trane’s stock transfer records, then you are considered a “beneficial owner” of those shares. Trane shares held this way are sometimes referred to as being held in “street name.” In that case, your broker, bank or other nominee will send you instructions on how to vote. If you have not heard from the broker, bank or other nominee who holds your Trane stock, please contact them as soon as possible. If you attend the special meeting in person and want to vote Trane shares beneficially owned by you, you must bring a written proxy from your broker, bank or other nominee that identifies you as the sole representative entitled to vote the Trane shares indicated.

You can revoke your proxy at any time before the vote is taken at the special meeting. If you have not voted through your broker or other nominee, you may revoke your proxy before the proxy is voted by:

 

   

delivering a written notice of revocation of proxy, which is dated a later date than the initial proxy, to Trane’s Secretary;

 

   

submitting a duly executed proxy bearing a later date than the initial proxy;

 

   

submitting a new proxy by telephone or through the Internet at a later time, but not later than 11:59 p.m. (Eastern Time) on                     , 2008, or the day before the meeting date if the special meeting is adjourned or postponed; or

 

   

voting in person at the special meeting; however, simply attending the special meeting without voting will not revoke an earlier proxy.

To submit a written notice of revocation or other communications about revoking your proxy, or to request a new proxy card, you should write to:

Mary Elizabeth Gustafsson, Secretary

Trane Inc.

One Centennial Avenue

Piscataway, New Jersey 08855

Attention: Secretary

If your shares of Trane common stock are held in street name, you should follow the instructions of your broker or nominee regarding the revocation of proxies. If your broker or nominee allows you to submit a proxy

 

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by telephone or through the Internet, you may be able to change your vote by submitting a proxy again by telephone or through the Internet.

All shares represented by valid proxies received through this solicitation, and not revoked, will be voted in accordance with your instructions on the proxy card. If you submit a proxy by telephone or through the Internet, your shares will be voted at the special meeting as instructed.

If you make no specification on your proxy card as to how you want your shares voted before signing and returning it, your proxy will be voted “FOR” adoption of the merger agreement. We intend, with respect to proxies that make no specification as to, or proxies that vote in favor of, the proposal with respect to any procedural matters incident to the conduct of the special meeting, such as adjournment of the special meeting, that the shares represented by properly submitted proxies will be voted, or not voted, by and at the discretion of the persons named as proxies on the proxy card. However, proxies that indicate a vote “against” adoption of the merger agreement but do not indicate a vote on the proposal with respect to procedural matters incident to the conduct of the special meeting will not be voted in favor of any adjournment of the special meeting for the purpose of soliciting additional votes in favor of the adoption of the merger agreement.

You should NOT send stock certificates with your proxy cards. If the merger is completed, shareholders will be mailed a transmittal form promptly following the completion of the merger with instructions on how to exchange Trane common stock certificates.

Effects of Abstentions and Broker Non-Votes

Absent specific instructions from the beneficial owner of shares, brokers may not vote shares of Trane common stock with respect to the adoption of the merger agreement, any other matters that may properly come before the special meeting, or any adjournment of the special meeting. For purposes of determining whether shareholders have approved the adoption of the merger agreement, abstentions and broker non-votes will have the same effect as a vote against the merger agreement. For purposes of acting upon any procedural matters incident to the conduct of the meeting (other than adjournment), abstentions and broker non-votes will have no effect on the outcome of the action. For purposes of acting upon any adjournment for the purpose of soliciting additional proxies, abstentions and broker non-votes will have the effect of a vote against the matter.

Share Ownership of Trane Directors and Executive Officers

At the close of business on the record date, Trane’s directors and executive officers as a group owned and were entitled to vote             shares of Trane common stock, representing approximately    % of the outstanding shares of Trane common stock. All of the directors and executive officers of Trane that are entitled to vote at the special meeting have indicated that they currently intend to vote their shares of Trane common stock in favor of adoption of the merger agreement.

Solicitation of Proxies

Trane will bear the costs of soliciting proxies from its shareholders. However, Trane and Ingersoll Rand have agreed to share equally the costs of filing, printing and mailing Ingersoll Rand’s registration statement on Form S-4 and this proxy statement/prospectus. In addition to soliciting proxies by mail, directors, officers and employees of Trane, without receiving additional compensation therefor, may solicit proxies by telephone, by facsimile or in person. Arrangements may also be made with brokerage firms and other custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of shares held of record by those persons, and Trane will reimburse those brokerage firms, custodians, nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them in connection with those actions. In addition, Georgeson Inc. has been retained by Trane to assist in the solicitation of proxies. Georgeson may contact holders of shares of Trane common stock by mail, telephone, facsimile, telegraph or in-person interviews and may request brokers, dealers and other nominee shareholders to forward materials to beneficial owners of shares of Trane common stock. Georgeson will receive reasonable and customary compensation for its services (estimated at $20,000) and will be reimbursed for certain reasonable out-of-pocket expenses and other customary costs.

 

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THE MERGER

General

On December 14, 2007, Trane’s board of directors and Ingersoll Rand’s board of directors each approved the merger agreement, which provides for the acquisition by Ingersoll Rand of Trane through a merger of Indian Merger Sub, Inc., a newly formed and wholly-owned subsidiary of Ingersoll Rand, with and into Trane. After the merger, Trane will be the surviving corporation and will be a wholly-owned subsidiary of Ingersoll Rand.

Upon completion of the merger, each share of Trane common stock (other than dissenting shares and shares of Trane common stock held by Trane or any of its subsidiaries or held by Ingersoll Rand) will be converted into the right to receive (i) 0.23 of an Ingersoll Rand Class A common share, par value $1.00 per share, and (ii) $36.50 in cash, without interest. If Trane or Ingersoll Rand reasonably determines that it is necessary in order to list on the NYSE the Ingersoll Rand Class A common shares to be issued in the merger without the requirement of a vote of Ingersoll Rand’s shareholders, Ingersoll Rand will substitute up to $1.00 per share of cash for a portion of the stock consideration having an equivalent value (using a value per Ingersoll Rand Class A common share equal to the Ingersoll Rand Reference Price). A vote by Trane’s shareholders for the adoption of the merger agreement constitutes approval of the merger whether or not Ingersoll Rand substitutes up to $1.00 per share in cash for a portion of the stock consideration having an equivalent value as described above.

Background of the Merger

On February 1, 2007, Trane (then known as American Standard Companies Inc., which, prior to the spinoff of the Vehicle Control Systems business and sale of the Bath and Kitchen business, as applicable, is referred to as the company) announced that its board of directors had completed a strategic review of the company and unanimously approved a plan to separate its three businesses during 2007. The announced separation plan included a plan to spinoff the company’s Vehicle Control Systems business and to sell the company’s Bath and Kitchen business, with the company retaining and focusing on its global HVAC business. The board had concluded that separating the company’s businesses into three separate companies would create greater shareholder value than the existing company structure and would provide the separated companies with substantial opportunities and benefits allowing them to more effectively operate their respective businesses, including by providing the separated companies with increased strategic focus, enhanced opportunities for growth, increased market recognition, improved capital flexibility and increased ability to attract, retain and motivate employees.

In furtherance of the separation plan, on July 12, 2007, the board of directors of the company approved the spinoff of its Vehicle Control Systems business into a new publicly traded company named WABCO Holdings Inc. The spinoff of WABCO was completed at 11:59 p.m. on July 31, 2007 and WABCO began trading thereafter as an independent company on the NYSE under the ticker symbol “WBC.”

In addition, on July 23, 2007, the company entered into an agreement to sell its Bath and Kitchen business to affiliates of Bain Capital Partners, LLC. The sale was completed on October 31, 2007 for approximately $1.745 billion after closing adjustments but subject to certain post-closing adjustments. Combined with the proceeds received by the company from the sale of its Venesta Washroom Systems business (which was formerly part of the Bath and Kitchen business) in March 2007, the company’s gross proceeds from the sale of the Bath and Kitchen business totaled approximately $1.91 billion. Upon completion of the sale of the Bath and Kitchen business, the company announced that it intended to use the net proceeds from the sale of the Bath and Kitchen business to repurchase common stock and reduce debt to keep the company at investment-grade standards, and that its board of directors had authorized an additional $750 million for the repurchase of common stock through December 2008. Subsequently, the company changed its name from “American Standard Companies Inc.” to “Trane Inc.” and on November 28, 2007 began trading on the NYSE under the ticker symbol “TT.”

 

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The company’s separation plan did not include or anticipate the sale of Trane to a third party. At the time of the announcement of the separation plan, and at the time the company completed the spin-off of WABCO, the company’s board of directors and management intended for Trane to continue as an independent company and the company had no plan or intent to arrange for the sale of Trane. In addition, none of the company’s or WABCO’s management or their board of directors had any negotiations regarding any acquisition of Trane by Ingersoll Rand or any other third party prior to the spin-off of WABCO and none of the company’s or WABCO’s management or their board of directors had any intention of entering into any such negotiations at the time of the spin-off of WABCO.

On August 1, 2007, Ingersoll Rand’s board of directors held a regularly scheduled meeting, at which the board discussed the potential acquisition of Trane. At the conclusion of the meeting, Ingersoll Rand’s board of directors authorized Herbert L. Henkel, Chairman, President and Chief Executive Officer of Ingersoll Rand, to contact Frederic M. Poses, Trane’s Chief Executive Officer, to discuss a potential transaction.

On August 15, 2007, Mr. Henkel contacted Mr. Poses on an unsolicited basis and without any prior negotiations regarding a potential acquisition of Trane, to set up a meeting with Mr. Poses to discuss a potential combination of the two companies. On August 22, 2007, Mr. Henkel and Mr. Poses met in person and Mr. Henkel expressed an interest in exploring a potential combination of the two companies. During this meeting, Mr. Henkel suggested that the consideration payable in any such potential transaction would consist of cash and Ingersoll Rand Class A common shares, but Mr. Henkel did not propose a purchase price for Trane. In addition, Mr. Henkel indicated that he would be open to discussing the possibility of leadership roles for certain members of Trane’s management team and having directors from Trane’s board of directors serve on Ingersoll Rand’s board following the closing of such transaction. Mr. Poses informed Mr. Henkel that he would discuss with Trane’s board of directors Mr. Henkel’s interest in pursuing such discussions.

Shortly after the August 22, 2007 meeting between Mr. Poses and Mr. Henkel, Mr. Poses contacted Steven E. Anderson, Steven F. Goldstone and Edward E. Hagenlocker, the chairmen of Trane’s three standing committees, to update them on his discussions with Mr. Henkel on August 22, 2007. During this discussion, the independent directors determined that Lazard, which had been retained by Trane to act as its financial advisor in connection with the separation plan, should prepare an updated financial analysis of Trane and an analysis of Ingersoll Rand’s financial strength and capacity to enter into a combination transaction with Trane to assist the board in its consideration of a possible transaction with Ingersoll Rand.

On September 21, 2007, during a call between Mr. Poses, the chairmen of Trane’s three standing committees and Lazard, Lazard discussed its updated financial analysis of Trane and an analysis of Ingersoll Rand’s financial strength and capacity to enter into a combination transaction with Trane. The directors expressed their view that Mr. Poses should not solicit a specific transaction proposal from Ingersoll Rand prior to discussing the Lazard analysis and the possible transaction with the full board at the October 4, 2007 regularly scheduled board meeting.

On October 4, 2007, at a regularly scheduled meeting of Trane’s board of directors, Trane’s management provided the board with an overview of the strategic plan for Trane’s HVAC business, including future business opportunities, the HVAC business’ strategies to address these opportunities and the risks associated therewith, the competitive landscape, and financial projections through 2010. See “—Financial Projections” beginning on page 51. Mr. Poses reported to the board on his discussions with Mr. Henkel and the interest expressed by Ingersoll Rand in pursuing discussions regarding a combination of the two companies. Representatives from Lazard discussed with the board the HVAC business on a stand-alone basis and provided the board with an overview of Ingersoll Rand and an analysis of Ingersoll Rand’s financial ability to acquire Trane at various prices. Representatives from Trane’s outside counsel, Skadden, Arps, Slate, Meagher & Flom LLP, which we refer to in this proxy statement/prospectus as Skadden, reviewed the legal duties of Trane’s directors in the context of a strategic transaction involving Trane. At the conclusion of this meeting, the independent members of Trane’s board of directors determined, in executive session, to continue to pursue Trane’s strategy of being an independent company focusing on its core HVAC business pursuant to its long-term strategic plan rather than

 

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pursuing a business combination with Ingersoll Rand at this time, and to continue with the planned appointment of a new Chief Executive Officer to replace Mr. Poses, who was scheduled to retire at the end of 2007. Following the meeting, Mr. Poses contacted Mr. Henkel by telephone to inform him that Trane desired to remain an independent company and continue to pursue its long-term strategic plan.

Between October 4, 2007 and October 19, 2007, there were no contacts or discussions between the members of Ingersoll Rand’s and Trane’s management or their respective advisors regarding a potential transaction.

On October 6, 2007, at a regularly scheduled meeting of Ingersoll Rand’s board of directors, Mr. Henkel provided an update to board members of his discussions with Mr. Poses regarding a potential business combination with Trane. The board of directors authorized Mr. Henkel to send a letter to Trane proposing a transaction on the terms discussed at the meeting.

On October 19, 2007, Mr. Henkel contacted Mr. Poses by telephone to inform him that Ingersoll Rand would be sending a letter to Trane containing a transaction proposal on October 24, 2007. On October 24, 2007, Ingersoll Rand delivered a written proposal to Trane, which we refer to in this proxy statement/prospectus as the October 24 Proposal. The October 24 Proposal indicated that, based on publicly available information, Ingersoll Rand was interested in acquiring all outstanding shares of Trane common stock for a price of $45.00 per share, representing a total equity consideration of approximately $9 billion. The October 24 Proposal indicated that Trane shareholders would receive approximately two-thirds of the consideration in cash and one-third of the consideration in Ingersoll Rand Class A common shares, with the share consideration not to exceed 20% of Ingersoll Rand’s outstanding shares.

Shortly after delivering the October 24 Proposal, Mr. Henkel contacted Mr. Poses by telephone to emphasize that (i) Ingersoll Rand was ready to move forward on an expedited basis; (ii) Ingersoll Rand was willing to appoint Trane designees to Ingersoll Rand’s board of directors following completion of the transaction; (iii) Ingersoll Rand would consider key members of Trane’s management for leadership roles in the combined company following the transaction; and (iv) Ingersoll Rand would operate Trane as a stand-alone business segment in the combined company. Mr. Henkel also stated that since the proposed cash/stock allocation in the proposal would result in less than 20% of Ingersoll Rand’s outstanding common stock being issued as consideration in the transaction, the closing of the transaction would not be subject to approval by Ingersoll Rand’s shareholders. Mr. Poses informed Mr. Henkel that he would review the October 24 Proposal with Trane’s board of directors.

On October 25, 2007, at a special meeting of Trane’s board of directors, at which members of Trane’s senior management and representatives of Skadden and Lazard were present, Mr. Poses reported on his discussions with Mr. Henkel, and representatives from Skadden and Lazard reviewed the key elements of the October 24 Proposal. The representatives from Skadden also reviewed the directors’ fiduciary duties in considering the proposed transaction. Following preliminary consideration of the October 24 Proposal, the independent members of Trane’s board of directors determined, in executive session, to defer further consideration of the October 24 Proposal until it had received an updated financial analysis from Lazard and further discussed with management and Trane’s advisors potential responses to the October 24 Proposal.

On October 28, 2007, at a special meeting of Trane’s board of directors, at which members of Trane’s senior management and representatives of Skadden, Lazard and Davis Polk & Wardwell (which had been retained by the independent members of Trane’s board of directors) were present, representatives from Lazard discussed with the board their financial analysis of Trane. Representatives from Lazard also reviewed the key assumptions in management’s strategic plan for 2007 through 2010, including management’s estimates of revenue growth and margin improvement for such period, and compared that to the revenue growth and margin improvement actually achieved by Trane’s HVAC business from 2003 through 2006 and from 2001 through 2007. Lazard noted the decline in the performance of Trane’s residential systems business as reported in Trane’s recently issued quarterly

 

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earnings release and the increasing uncertainty in the outlook for Trane’s end markets, and the impact that such factors have had on the recent trading price of Trane’s common stock. The board discussed in detail the assumptions in the strategic plan, including those pertaining to revenue growth and margin improvement, and the comparisons of projected revenue growth and margin improvement to that achieved in prior periods, and noted that the potentially declining economic conditions may make it more difficult for Trane to achieve the plan. Trane’s board of directors decided to have a further meeting to decide on appropriate steps to be taken in response to the October 24 Proposal.

On November 2, 2007, at a special meeting of Trane’s board of directors, at which members of Trane’s senior management and representatives of Skadden and Lazard were present, the board, after consideration of possible responses to the October 24 Proposal, authorized management to continue discussions with Ingersoll Rand and also authorized Mr. Poses to inform Mr. Henkel that Ingersoll Rand would need to improve its proposed offer price for Trane and that it believed that due diligence on Trane could help Ingersoll Rand in reaching a higher valuation of Trane. Trane’s board of directors also authorized Lazard to contact other potentially interested third parties to determine whether they would have an interest in exploring a possible strategic transaction with Trane. Representatives from Lazard reviewed a list of potential third parties to be contacted and noted that Lazard would contact the parties most likely to be interested in exploring a transaction with Trane. In order to efficiently manage the process of reviewing the October 24 Proposal and any alternatives thereto, Trane’s board of directors also approved the formation of a transaction committee of the board consisting of Mr. Anderson, Mr. Goldstone and Mr. Hagenlocker, the chairmen of Trane’s three standing committees, and Mr. Poses, and authorized the transaction committee to provide advice and guidance to Trane’s management and advisors in the exploration of the opportunity presented by the October 24 Proposal and any other transaction proposals which may be received from other third parties.

Also on November 2, 2007, Mr. Poses contacted Mr. Henkel by telephone to inform him that while Trane was interested in exploring a potential transaction with Ingersoll Rand, the offer put forth by Ingersoll Rand in the October 24 Proposal would need to be improved. Mr. Poses indicated to Mr. Henkel that Trane was willing to permit Ingersoll Rand to conduct due diligence, subject to the execution of a customary confidentiality agreement, to assist Ingersoll Rand in improving its offer. In connection therewith, Mr. Henkel suggested that the principal officers of Ingersoll Rand and Trane have a due diligence meeting on November 9, 2007. Mr. Poses indicated that topics to be covered at that meeting could include, among other things, a discussion of Trane’s strategic plan for 2007 through 2010, possible tax and other synergies and certain of Trane’s contingent liabilities.

During the week of November 5, Mr. Henkel updated the members of Ingersoll Rand’s board of directors on the status of the discussions with Trane.

Trane and Ingersoll Rand entered into a mutual confidentiality agreement, dated November 6, 2007, which included a “standstill” provision. Upon entering into such agreement, each company began conducting detailed financial, business, operational and legal due diligence on the other company. From and after November 6, 2007, Trane and Ingersoll Rand each made available to the other party legal and business due diligence materials and the parties, with assistance from their financial and legal advisors, conducted their respective due diligence investigations, which included discussions and meetings between Trane’s and Ingersoll Rand’s senior management regarding their respective businesses. During this time, each of the parties continued to respond to follow-up questions received from the other party and its respective advisors on various contingent liabilities as well as additional due diligence requests relating to other aspects of the parties’ respective businesses.

On November 8, 2007, at a special meeting of the transaction committee of Trane’s board of directors, at which members of Trane’s senior management and representatives of Skadden and Lazard were present, representatives from Lazard reported that since the last meeting of Trane’s board of directors they had spoken with representatives of three of the previously identified companies that were contacted to determine whether they might be interested in exploring a possible transaction with Trane. Lazard reported that two of these three companies stated that they had already done some analysis on Trane based on publicly available information and

 

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were not interested in pursuing a transaction and that the third company said it was not interested in pursuing a transaction with Trane at that time. Representatives of Lazard also provided an overview of other potentially interested parties that, should the transaction committee approve, could be contacted by Lazard. Following further discussion, the transaction committee authorized Lazard to contact the additional parties.

On November 9, 2007, the principal officers of Trane and Ingersoll Rand and their legal and financial advisors met in Skadden’s offices and reviewed certain information provided by Trane to Ingersoll Rand, including Trane’s strategic plan for 2007 through 2010. At the end of the meeting, Ingersoll Rand provided Trane with certain additional information requests as part of its continuing due diligence investigation of Trane.

On November 13, 2007, at a special meeting of Trane’s board of directors, at which members of Trane’s senior management and representatives of Skadden and Lazard were present, Mr. Poses reported on discussions with Mr. Henkel following the board meeting on November 2, 2007. Representatives from Lazard gave a detailed report on the results of Lazard’s discussions with the previously identified companies that were contacted to determine whether they might be interested in exploring a possible transaction with Trane, including the fact that four of the companies contacted were not interested in exploring a transaction, three were considering Lazard’s inquiry and would respond as soon as possible and one company had not yet been reached.

On November 14, 2007, representatives from Lazard delivered certain financial projections of Trane to Ingersoll Rand and its financial advisors. See the projections described under the section entitled “—Financial Projections” beginning on page 51.

On November 16, 2007, Ingersoll Rand’s board of directors held a special meeting by teleconference, at which members of Ingersoll Rand’s senior management and representatives of Simpson Thacher & Bartlett LLP, counsel to Ingersoll Rand, which we refer to in this proxy statement/prospectus as Simpson, were present. Mr. Henkel updated the directors on the status of discussions with Trane. Ingersoll Rand’s board of directors and senior management reviewed and discussed strategic considerations relating to the proposed merger and the status of Ingersoll Rand’s due diligence investigation of Trane. During the meeting, Ingersoll Rand’s board of directors discussed the proposed transaction and asked questions of Ingersoll Rand’s senior management. At the conclusion of the meeting, Ingersoll Rand’s directors authorized management to continue to pursue the transaction with Trane.

On November 19, 2007, Mr. Henkel contacted Mr. Poses by telephone to inform him that Ingersoll Rand would be delivering a written proposal shortly containing an offer price of $46.00 per share. Mr. Poses informed Mr. Henkel that this $1.00 increase from the October 24 Proposal was not significant enough and would need to be improved further but that he would discuss any revised proposal with Trane’s board of directors.

On November 20, 2007, Ingersoll Rand delivered a written proposal to Trane, which we refer to in this proxy statement/prospectus as the November 20 Proposal. The November 20 Proposal indicated that, based on publicly available information and the non-public information that Trane had provided to Ingersoll Rand, Ingersoll Rand was prepared to acquire all of the outstanding shares of Trane common stock for a price of $46.00 per share, representing a total equity consideration of approximately $9.2 billion. The November 20 Proposal indicated that the merger consideration would consist of $33.00 in cash and 0.27 of an Ingersoll Rand Class A common share per share of Trane common stock. The aggregate consideration implied in the November 20 Proposal represented a 35% premium to Trane’s closing market price on November 19, 2007. The November 20 Proposal indicated Ingersoll Rand’s willingness to appoint up to two of Trane’s current board members on the board of directors of Ingersoll Rand following the merger, and that Ingersoll Rand anticipated that key members of Trane’s management would have leadership roles following the transaction. While the November 20 Proposal had the full support of Ingersoll Rand’s board of directors, the proposal stated that the offer remained subject to the negotiation of a mutually acceptable merger agreement, approval by the board of directors of Ingersoll Rand and Ingersoll Rand’s completion of confirmatory business, legal, accounting and other due diligence, which Ingersoll Rand expected to complete by December 5, 2007. Finally, the November 20 Proposal included a

 

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request that Trane grant Ingersoll Rand a period of exclusivity through December 5, 2007, by which time Ingersoll Rand expected to complete due diligence and have negotiated and executed definitive agreements. Ingersoll Rand’s request for exclusivity was never granted by Trane and the parties continued discussions on a non-exclusive basis.

During the week of November 19, Mr. Henkel updated the members of Ingersoll Rand’s board of directors on the status of the discussions with Trane.

Also on November 20, 2007, Trane received a written non-binding indication of interest for the acquisition of Trane by one of the third parties that had been contacted by Lazard. The third party indicated that it was now working in partnership with a private equity fund. The proposal did not include a purchase price but indicated that the third party would provide Trane with an offer price within ten working days based on Trane’s publicly available information. The proposal (1) included information regarding the financing necessary to complete the proposed acquisition, (2) outlined the need to conduct a detailed due diligence investigation of Trane, (3) indicated that the execution of a definitive merger agreement would be subject to final internal approvals and that it was likely that the proposed transaction would be approved by the requisite regulatory authorities, (4) contemplated that many of Trane’s management team would continue to play important and expanded roles following the transaction and (5) stated that with Trane’s cooperation, due diligence and signing of a definitive agreement could be completed within approximately four weeks.

Later in the evening on November 20, 2007, at a special meeting of Trane’s board of directors, at which members of Trane’s senior management and representatives of Skadden and Lazard were present, representatives from Lazard and Skadden reviewed the contents of the November 20 Proposal, including the fact that the stock component of the consideration offered by Ingersoll Rand was being offered at a fixed exchange ratio, Ingersoll Rand’s request for an exclusivity period until December 5, 2007 and Ingersoll Rand’s contemplated timing to finalize due diligence and sign a definitive agreement. Representatives from Skadden noted that less than 20% of Ingersoll Rand’s outstanding common stock would be issued as consideration in the transaction and, accordingly, the closing of the transaction would not be subject to approval by Ingersoll Rand’s shareholders. Representatives from Lazard reported on the contacts made by Lazard to other third parties that might be interested in a possible transaction with Trane, in which (i) five of the companies indicated that they were not interested in a strategic transaction, (ii) one company indicated that it would need three to four months to consider a transaction and that it would respond to Lazard in due course, (iii) one company could be interested in discussing various joint venture or strategic alliance opportunities but had not specifically expressed an interest in proceeding with an acquisition of Trane as a whole and (iv) one party had submitted the written non-binding indicative proposal on November 20, 2007 described above. Following a discussion regarding the November 20 Proposal, Trane’s board of directors authorized Mr. Poses to respond to Mr. Henkel that, consistent with prior messages, the November 20 Proposal needed to be improved. Trane’s board of directors agreed to reconvene on November 25, 2007 to further review Lazard’s financial analysis of Trane.

On November 21, 2007, Mr. Poses contacted Mr. Henkel by telephone and notified Mr. Henkel that he had discussed the November 20 Proposal with Trane’s board of directors and the board continued to believe that the price offered in the November 20 Proposal needed to be improved. During these discussions, Mr. Henkel indicated to Mr. Poses that he believed Ingersoll Rand could consider increasing the offer set forth in the November 20 Proposal to an aggregate consideration of $47.00 per share.

Later in the day on November 21, 2007, at a special meeting of the transaction committee of Trane’s board of directors, at which members of Trane’s senior management were present, Mr. Poses updated the transaction committee on the proposed agenda for the upcoming board meeting and on the discussions he had with Mr. Henkel on November 21, 2007. The committee authorized Mr. Poses to try to seek further improvements in the offer.

On November 25, 2007, at a special meeting of Trane’s board of directors, at which members of Trane’s senior management and representatives of Skadden and Lazard were present, representatives of Lazard reported

 

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that (i) the one remaining company that had been contacted indicated that it was not interested in pursuing a transaction with Trane primarily due to the size and timing of any such transaction, (ii) the third party that had submitted a proposal on November 20, 2007 anticipated delivering a written proposal to Trane on November 27, 2007 that would include its proposed offer price and (iii) Lazard had not received any further communications from the company that had previously indicated a willingness to explore a joint venture or other strategic alliance with Trane. Representatives from Lazard discussed with the board in detail the Lazard updated financial analyses and the terms of the November 20 Proposal. Lazard then reviewed the financial forecasts previously provided to Trane’s board of directors by Trane management which were based on management’s strategic plan for 2007 through 2010 and the forecasts provided to Ingersoll Rand on November 14, 2007. See the section entitled “—Financial Projections” beginning on page 51.

On November 26, 2007, Mr. Henkel contacted Mr. Poses by telephone. Mr. Poses told Mr. Henkel that he had discussed the November 20 Proposal with Trane’s board of directors again on November 25, 2007 and the board continued to believe that the November 20 Proposal needed to be improved. During this conversation, Mr. Henkel responded that he had had further discussions with Ingersoll Rand’s board of directors, and he did not believe that there was much opportunity to improve Ingersoll Rand’s offer to an aggregate consideration beyond $47.00 per share, as previously discussed.

On November 27, 2007, representatives from Lazard contacted representatives from the financial advisors to Ingersoll Rand by telephone to discuss Ingersoll Rand’s $47.00 per share proposal in order to ascertain whether the terms of such proposal could be improved. Lazard was informed that Ingersoll Rand viewed $47.00 per share as a full and fair offer, and that this offer would be presented to Trane in a letter to be sent shortly.

Also on November 27, 2007, Lazard received a written indication of interest from the third party that had submitted a proposal on November 20, 2007. The non-binding proposal was for an acquisition of all of the outstanding shares of Trane common stock for a purchase price of $42.50 per share in cash.

On November 28, 2007, Lazard received a telephone call from representatives from the financial advisors to Ingersoll Rand who informed them that the letter had been delayed because Ingersoll Rand was still considering the aggregate consideration in a revised offer.

Also on November 28, 2007, at a special meeting of the transaction committee of Trane’s board of directors, at which members of Trane’s senior management and representatives of Skadden and Lazard were present, Mr. Poses reported on the conversation he had with Mr. Henkel on November 26, 2007, and representatives from Lazard reported on their conversations with the representatives from Ingersoll Rand’s financial advisors. Lazard also reported the details of the written indication of interest that they had received from a third party on November 27, 2007. After discussion, the transaction committee authorized management and Trane’s advisors to continue to engage in discussions with Ingersoll Rand and their advisors to obtain from Ingersoll Rand a revised offer for review by Trane’s board of directors.

Later that day, in the evening of November 28, 2007, Mr. Poses and Mr. Henkel met for dinner. Mr. Henkel indicated to Mr. Poses that $47.00 per share was indeed the highest amount that Ingersoll Rand was prepared to offer, and that Ingersoll Rand was prepared to proceed with its own strategies, including pursuing alternative acquisitions, and forego the opportunity to acquire Trane if Trane did not accept $47.00 per share.

On November 29, 2007, after discussions with members of the board of directors of Ingersoll Rand, Mr. Henkel delivered a written proposal to Trane, which we refer to in this proxy statement/prospectus as the November 29 Proposal. In the November 29 Proposal, Ingersoll Rand confirmed in writing its proposal to acquire all of the outstanding shares of Trane common stock for a per share consideration of $33.50 in cash and 0.27 of an Ingersoll Rand Class A common share. Based on Ingersoll Rand’s closing share price on November 28, 2007, the offer contained in the November 29 Proposal was valued at $47.36 per share. The November 29 Proposal indicated that Ingersoll Rand expected to fund the cash consideration from available cash

 

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on the balance sheet and newly issued debt, but the offer would not be subject to a financing contingency and would include only customary conditions, including regulatory approvals, with respect to which Ingersoll Rand did not anticipate any significant issues. In addition, Ingersoll Rand would need to obtain final approval from its board of directors after negotiation of a mutually acceptable definitive merger agreement and completion of due diligence.

On November 30, 2007, at a special meeting of Trane’s board of directors, at which members of Trane’s senior management and representatives of Skadden and Lazard were present, representatives from Lazard noted that, other than the one proposal received on November 27, 2007, which was substantially below the latest proposal from Ingersoll Rand, Lazard had not engaged in discussions with or received any indication of interests from third parties since the last board meeting. After consideration of the one proposal that had been received from a third party, the board determined not to pursue further discussions with the third party that made the proposal on November 27, 2007 in light of, among other things, the price offered as compared to the board’s view of the valuation of Trane on a standalone basis, the fact that the proposal was made by a third party working with a private equity firm and would involve substantial leverage at the offer price and the board’s view that it was unlikely that the proposal received from such third party would be able to be increased enough to be competitive with the latest offer received from Ingersoll Rand. Representatives of Lazard reported to the board that Lazard and Mr. Poses had engaged in conversations with Mr. Henkel and representatives of the financial advisors to Ingersoll Rand since the last board meeting in an attempt to persuade Ingersoll Rand to raise its offer price. Lazard then reviewed, among other things, the financial terms of the November 29 Proposal. Representatives from Skadden outlined the process should the board decide to move forward. The board also discussed possible price protection mechanisms that could be requested from Ingersoll Rand given that the November 29 Proposal included a fixed exchange ratio. Mr. Poses noted that Ingersoll Rand had continuously indicated a strong reluctance to include any price protection provisions because any increase in the cash portion of the consideration could have a negative impact on Ingersoll Rand’s investment-grade credit rating and Ingersoll Rand would not be able to issue more stock in the merger without triggering the requirement to obtain Ingersoll Rand shareholder approval, and because of Ingersoll Rand’s belief that the inclusion of a price protection mechanism in the merger agreement would provide incentives for traders in Ingersoll Rand common shares to put pressure on Ingersoll Rand’s stock price prior to the closing of the transaction. Trane’s board of directors also considered the risks and benefits associated with remaining as a stand-alone public company, including the prospects and growth opportunities for Trane if it were to remain a stand-alone public company, or attempting to enhance shareholder value through other strategic alternatives. At the conclusion of the meeting, and after extensive discussions, Trane’s board of directors authorized management to continue discussions with Ingersoll Rand regarding a possible transaction, to negotiate a definitive merger agreement and to continue to seek improvement in the terms of the offer, including the possible inclusion of price protections mechanisms in the offer.

On December 1, 2007, Simpson distributed an initial draft merger agreement to Skadden. Skadden delivered comments on the draft merger agreement to Simpson on December 5, 2007.

During the period from December 5, 2007 through December 15, 2007, the parties negotiated the provisions of the merger agreement and the related disclosure schedules. In addition, during this period, Trane and Ingersoll Rand and their respective legal and financial advisors continued due diligence.

On December 5, 2007, Ingersoll Rand’s board of directors held a regular meeting, at which members of Ingersoll Rand’s senior management and representatives of Simpson and Ingersoll Rand’s financial advisors were present. At the meeting, the board was updated on the progress of the negotiations regarding the terms and conditions of the proposed transaction and the results of the due diligence review of Trane. Representatives from Simpson reviewed the legal duties of Ingersoll Rand’s directors in the context of a strategic transaction involving Ingersoll Rand. Representatives of Ingersoll Rand’s financial advisors made a financial presentation to Ingersoll Rand’s board of directors which included a valuation analysis of Trane and the pro forma impact of the transaction on Ingersoll Rand and its credit rating. At the conclusion of the meeting, Ingersoll Rand’s board of directors authorized management to continue negotiations with Trane and attempt to resolve the remaining outstanding issues.

 

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On December 6, 2007, at a regular meeting of Trane’s board of directors, at which members of Trane’s senior management and representatives of Skadden and Lazard were present, the board was updated on the status of discussions with Ingersoll Rand and reviewed the terms and conditions of the proposed transaction. At the meeting, representatives of Skadden reviewed the terms of the draft merger agreement that was under negotiation, the principal outstanding open issues between the parties and the timing and process of the proposed merger. At the conclusion of the meeting, and after extensive discussions, Trane’s board of directors authorized management to continue negotiations with Ingersoll Rand and attempt to resolve the remaining outstanding issues and continue to seek improvement in the terms of the offer.

On December 8, 2007, Simpson distributed to Skadden an initial draft of the debt commitment letter that Ingersoll Rand had obtained from its financing sources in connection with the proposed transaction. During the period from December 8, 2007 through December 14, 2007, the parties and their respective legal advisors discussed and revised the debt commitment letter.

On December 9, 2007, the principal officers of Ingersoll Rand and Trane, and representatives of each of their legal and financial advisors, met in Skadden’s offices and reviewed certain information provided by Ingersoll Rand to Trane regarding each of Ingersoll Rand’s business segments and other financial information, including projected financial information, of Ingersoll Rand. Following the business presentations by Mr. Henkel and other members of Ingersoll Rand’s management team, representatives of Skadden and Simpson met to discuss the principal open issues remaining in the latest draft of the merger agreement and disclosure schedules.

On December 10, 2007, representatives of Simpson and Skadden participated in a conference call to continue to discuss the remaining outstanding issues in the merger agreement, including possible price protection features that could be included in the merger agreement, provisions relating to Trane’s right to change its recommendation of or terminate the merger agreement, the amount of the termination fee and the circumstances in which it was payable and the treatment of Trane stock options in the merger.

On December 12, 2007, during discussions between representatives from the financial advisors to Ingersoll Rand and Lazard, representatives from the financial advisors to Ingersoll Rand indicated that Ingersoll Rand was not willing to provide any form of price protection on the value of the Ingersoll Rand common stock to be received in the merger. However, representatives from the financial advisors to Ingersoll Rand noted to representatives of Lazard that Ingersoll Rand was prepared to revise the allocation of consideration offered in the November 29 Proposal by increasing the cash consideration per share to $35.50, and correspondingly reducing the stock consideration exchange ratio from 0.27 to 0.23 of an Ingersoll Rand Class A common share, which would reduce the impact on the value of the total merger consideration in the event that the Ingersoll Rand stock price declined prior to the merger.

Later in the afternoon on December 12, 2007, at a special meeting of the transaction committee of Trane’s board of directors, at which members of Trane’s senior management and representatives of Skadden and Lazard were present, the transaction committee discussed the revised proposal from Ingersoll Rand and Trane’s request for price protection in the merger agreement.

On December 13, 2007, Mr. Poses contacted Mr. Henkel by phone to request that Ingersoll Rand reconsider Trane’s request for price protection. During this conversation, Mr. Henkel expressed again his view that Ingersoll Rand would not be willing to move forward with the proposed transaction if the merger agreement contained any price protection features. However, Mr. Henkel indicated to Mr. Poses that in an effort to resolve the issue, in exchange for not including any price protection features in the merger agreement, Ingersoll Rand was prepared to increase the cash portion of the consideration by an additional $1.00 per share so that Ingersoll Rand’s best and final offer would consist of $36.50 in cash and 0.23 of an Ingersoll Rand Class A common share per share of Trane common stock. Mr. Poses indicated that he would discuss this proposal with Trane’s board of directors at a meeting the following evening.

 

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On December 14, 2007, there was a special meeting of Trane’s board of directors, at which members of Trane’s senior management and representatives of Skadden and Lazard were present. Prior to this meeting, Trane’s board of directors was provided with materials related to the proposed transaction from Lazard and Skadden. At the meeting:

 

   

representatives of Skadden reviewed with the board its fiduciary duties in considering the proposed transaction and reviewed the developments in the negotiations with Ingersoll Rand, including the terms of the merger agreement and the changes that had been effected to the merger agreement since the last board meeting, the terms of the debt financing commitment that Ingersoll Rand had obtained, and the results of the legal due diligence review of Ingersoll Rand;

 

   

Trane’s management and Lazard updated the board on the completion of the business and financial due diligence review of Ingersoll Rand and discussed with the board positive and negative factors and risks to be considered in connection with the proposed merger, as discussed in the section entitled “—Recommendation of Trane’s Board of Directors; Reasons for the Merger” beginning on page 39; and

 

   

representatives of Lazard made a financial presentation and rendered to Trane’s board of directors its oral opinion, which was subsequently confirmed by delivery of a written opinion, dated December 15, 2007, to the effect that, as of that date, and based on and subject to the various assumptions made, matters considered and limitations described in the opinion, the aggregate consideration to be paid to the holders of Trane common stock in the merger was fair, from a financial point of view, to such holders, as discussed in the section entitled “—Opinion of Lazard Frères & Co. LLC” beginning on page 44. Such opinion is attached to this proxy statement/prospectus as Annex B.

Following careful consideration of the proposed merger agreement and merger, Trane’s board of directors unanimously determined that the merger agreement and the merger are advisable and fair to, and in the best interests of, Trane and its shareholders, approved the merger agreement and the merger and resolved to recommend that Trane shareholders vote in favor of adoption of the merger agreement. Trane’s board of directors authorized the appropriate officers of Trane to finalize the merger agreement and related documentation.

Also on December 14, 2007, there was a special meeting of Ingersoll Rand’s board of directors, at which members of Ingersoll Rand’s senior management and representatives of Simpson and Ingersoll Rand’s financial advisors were present. Prior to this meeting, Mr. Henkel had updated the members of the board on December 10, 12 and 13 on the status of negotiations with Trane. During the December 14 meeting, senior management reviewed with the board the progress of the negotiations regarding the terms of the proposed transaction and apprised the board of directors of the results of its due diligence review of Trane. The board received the financial analysis and advice of its financial advisors. In addition, a representative of Simpson reviewed the legal terms of the proposed definitive merger agreement and responded to questions from directors. Ingersoll Rand’s board of directors discussed the proposed transaction and related merger agreement and asked questions of Ingersoll Rand’s senior management and legal and financial advisors. Following deliberations, Ingersoll Rand’s board of directors, by unanimous vote of all directors, approved the merger agreement.

The parties finalized and executed the merger agreement and related documentation on Saturday, December 15, 2007. On Monday, December 17, 2007, before the opening of trading on the NYSE, Trane and Ingersoll Rand issued a joint press release announcing the execution of the merger agreement.

Recommendation of Trane’s Board of Directors; Reasons for the Merger

Trane’s board of directors has unanimously approved the merger agreement and the merger and has determined that the merger agreement and the merger are advisable and fair to, and in the best interests of, Trane and the holders of Trane common stock. Accordingly, Trane’s board of directors recommends that Trane shareholders vote “FOR” adoption of the merger agreement.

 

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In reaching its determination to recommend adoption of the merger agreement, Trane’s board of directors consulted with senior management and Trane’s legal and financial advisors and considered various factors, including those listed below.

Trane’s board of directors considered the following factors as generally supporting its decision to enter into the merger agreement:

 

   

The value of the consideration to be received by Trane shareholders pursuant to the merger, including that the implied merger consideration of $48.05 per share (calculated using the closing trading price of Ingersoll Rand Class A common shares on December 13, 2007 of $50.21, which was the last trading day prior to the Trane board meeting to approve the merger agreement) represented a significant premium over the market prices at which Trane common stock had previously traded, including a premium of approximately:

 

   

34.1% over the closing price of Trane common stock of $35.83 per share on December 13, 2007, the last trading day prior to the Trane board meeting to approve the merger agreement;

 

   

29.9% over the closing price of Trane common stock of $37.00 per share on December 6, 2007, the trading day that was one week prior to the Trane board meeting to approve the merger agreement;

 

   

31.0% over the closing price of Trane common stock of $36.69 per share on November 15, 2007, the trading day that was one month prior to the Trane board meeting to approve the merger agreement; and

 

   

32.5% over $36.27, which was the average closing price of Trane common stock for the thirty trading days prior to the Trane board meeting to approve the merger agreement.

 

   

Trane’s board of directors’ analysis and understanding of the business, operations, financial performance, financial condition, earnings and future prospects of Trane on a stand-alone basis, and Trane’s board of directors’ assessment, based on such analysis and understanding, that the merger with Ingersoll Rand would be more favorable to Trane and its shareholders than remaining an independent public company in light of the potential rewards and risks associated with Trane continuing to operate on a stand-alone basis. Those risks and uncertainties included those relating to Trane’s ability to achieve its future projections and expected margin improvement, and the potential impact on Trane of declining economic conditions in the HVAC industry generally.

 

   

Trane’s board of directors’ belief, after reviewing Trane’s potential strategic alternatives to the merger with Ingersoll Rand, including a merger or other strategic transaction with another third party, and taking into account the preliminary discussions with other third parties that were contacted by Lazard, after the initial contact by Ingersoll Rand, to solicit their potential interest in a strategic transaction with Trane (see “—Background of the Merger” beginning on page 30), that it was unlikely that another party would make or accept an offer to engage in a transaction with Trane that would be more favorable to Trane and its shareholders than the merger with Ingersoll Rand.

 

   

The opinion of Lazard, delivered orally to Trane’s board of directors on December 14, 2007, which was subsequently confirmed by delivery of a written opinion dated December 15, 2007, which provides that, as of the date of such opinion and based on and subject to the assumptions, qualifications and limitations described in the opinion, the merger consideration to be paid to the holders of Trane common stock in the merger was fair, from a financial point of view, to such holders. A copy of the written opinion of Lazard, dated December 15, 2007, which discusses the procedures followed, assumptions made, matters considered and the limitations of the reviews undertaken by Lazard in connection with its opinion, is attached as Annex B to this proxy statement/prospectus. Trane shareholders are urged to read the Lazard opinion in its entirety. See “—Opinion of Lazard Frères & Co. LLC” beginning on page 44.

 

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The strategic fit and complementary nature of Ingersoll Rand’s and Trane’s respective businesses and the potential presented by the merger with Ingersoll Rand for significant cost and revenue synergies that will benefit the combined company and position the combined company to be able to compete more effectively than Trane would be able to on a stand-alone basis. In this regard, Trane’s board of directors noted that Ingersoll Rand expects the combined company to generate over $300 million in annual pre-tax cost and revenue synergies by 2010. The anticipated synergies include purchase material savings through supplier rationalization and procurement leverage, improvements in manufacturing costs, and lower general and administrative costs. In addition, over a longer term, the combined company is expected to benefit from synergies relating to cross selling and service revenue expansion.

 

   

The Trane board of directors’ familiarity with the business of Ingersoll Rand and assessment of the intrinsic value of Ingersoll Rand’s Class A common shares relative to its recent historical trading prices and the fact that the merger will offer Trane shareholders the opportunity to participate in the potential growth of a larger combined company that is expected to (i) offer a diversified product mix with leading market positions in growth platforms, (ii) have a broad geographic footprint with a strong recurring revenue profile, (iii) have stable end-markets with low overall exposure to new home construction, (iv) have a leading international and domestic distribution network and (v) have substantial cash flows from operations, making the combined company well-positioned to accelerate growth both organically and through acquisitions.

 

   

The fact that a large portion of the merger consideration will be paid in cash, giving Trane shareholders an opportunity to immediately realize value for a significant portion of their investment and providing certainty of value. Moreover, the cash consideration reduces the impact on the overall merger consideration of a decrease in the trading price of Ingersoll Rand’s Class A common shares.

 

   

The likelihood, determined after consultation with legal counsel, that the regulatory approvals and clearances necessary to complete the merger would be obtained and the fact that Ingersoll Rand has agreed in the merger agreement (i) to use its reasonable best efforts to obtain those approvals and clearances, (ii) not to acquire any entity or enter into any other transaction if that acquisition or transaction would be reasonably likely to materially increase the risk of not obtaining, or materially delay the receipt of, the necessary regulatory approvals and clearances to complete the merger and (iii) to commit and effect any sale, divestiture or disposition of any assets or businesses of Ingersoll Rand or Trane (after the closing of the merger) as may be required in order to avoid any injunction or order by a governmental entity that would prevent or materially delay the closing of the merger, except to the extent that such action would reasonably be likely to have a material adverse effect on Ingersoll Rand and Trane, on a combined basis.

 

   

The terms and conditions of the merger agreement, including:

 

   

The limited closing conditions to Ingersoll Rand’s obligations under the merger agreement. In particular, the merger agreement contains no financing contingency and is not subject to approval by Ingersoll Rand shareholders;

 

   

The provisions of the merger agreement that allow Trane to engage in negotiations with, and provide information to, third parties, under certain circumstances in response to an unsolicited takeover proposal that Trane’s board of directors determines in good faith, after consultation with its outside legal advisors and its financial advisors, constitutes or could reasonably be expected to lead to a transaction that is more favorable to Trane shareholders than the merger with Ingersoll Rand;

 

   

The provisions of the merger agreement that allow Trane’s board of directors to change its recommendation that Trane shareholders vote in favor of the adoption of the merger agreement, if Trane’s board of directors determines in good faith that the failure to change its recommendation could reasonably be determined to be inconsistent with its fiduciary duties under applicable law;

 

   

The ability of Trane to specifically enforce the merger agreement or pursue damages against Ingersoll Rand in the event of any breach by Ingersoll Rand, including the right to pursue damages

 

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on behalf of Trane shareholders for the loss of the merger consideration in the event of a failure by Ingersoll Rand to consummate the merger when the closing conditions have otherwise been satisfied or there has been a breach that contributes to a failure of a closing condition; and

 

   

The provisions of the merger agreement that allow all holders of Trane stock options (other than certain executive officers who have agreed to roll over their options, subject to proration) to choose, through the option election, whether to convert their Trane stock options into Ingersoll Rand stock options or cash-out their Trane stock options in the merger.

 

   

The likelihood that Ingersoll Rand would be able to finance the proposed transaction, in light of the financial resources of Ingersoll Rand and the financing commitments that Ingersoll Rand has obtained from JPMorgan Chase Bank, Credit Suisse and Goldman Sachs which contain limited conditions to funding, and the indications from rating agencies that Ingersoll Rand would retain investment grade ratings after giving effect to the merger and the financing thereof.

 

   

The fact that holders of Trane common stock would own approximately 13% of the combined company’s fully diluted equity immediately following the merger and that Ingersoll Rand has agreed to appoint two members of Trane’s board of directors to Ingersoll Rand’s board of directors and, following the merger, to take all actions necessary to ensure that those members are nominated for election to Ingersoll Rand’s board of directors at each of the 2008, 2009, and 2010 annual meetings of Ingersoll Rand shareholders, which is expected to provide a degree of continuity and involvement by Trane directors in the combined company following the merger.

 

   

The fact that because the stock portion of the merger consideration is a fixed number of Ingersoll Rand Class A common shares, Trane’s shareholders will have the opportunity to benefit from any increase in the trading price of Ingersoll Rand’s Class A common shares between the announcement of the merger and the completion of the merger.

Trane’s board of directors also considered certain potentially negative factors in its deliberations concerning the merger, including the following:

 

   

The fact that because the stock portion of the merger consideration is a fixed exchange ratio of Ingersoll Rand Class A common shares to Trane common stock, Trane shareholders could be adversely affected by a decrease in the trading price of Ingersoll Rand Class A common shares during the pendency of the merger, and the fact that the merger agreement does not provide Trane with a price-based termination right or other similar protection. Trane’s board of directors determined that this structure was appropriate and the risk acceptable in view of:

 

   

The Trane board of directors’ review of the relative intrinsic values and financial performance of Ingersoll Rand and Trane;

 

   

The inclusion in the merger agreement of other structural protections such as the ability of Trane’s board of directors to change its recommendation of the merger whether or not an alternative transaction existed or was publicly announced and the condition in the merger agreement that requires Ingersoll Rand’s representations to be true and correct, subject to certain materiality thresholds, at the time of signing and closing of the merger agreement, including the representation that, since September 30, 2007, there has not been a material adverse effect on the business, assets, financial condition, liabilities or results of operations of Ingersoll Rand and its subsidiaries taken as a whole (as described in “The Merger Agreement—Representations and Warranties” beginning on page 71 and “The Merger Agreement—Conditions to the Merger” beginning on page 83); and

 

   

The fact that a substantial portion of the merger consideration will be paid in a fixed cash amount which reduces the impact of a decline in the trading price of Ingersoll Rand Class A common shares on the value of the merger consideration.

 

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The risk that the potential benefits and synergies sought in the merger will not be fully realized and the risks associated with the integration by Ingersoll Rand of Trane.

 

   

The fact that because only approximately 24% of the merger consideration will be in the form of Ingersoll Rand Class A common shares, Trane’s shareholders have a smaller ongoing equity participation in the combined company, including the opportunity to participate in any future earnings or growth of the combined company and future appreciation in the value of Ingersoll Rand Class A common shares following the merger. Trane’s board of directors considered that Trane shareholders would be able to reinvest the cash received in the merger in Ingersoll Rand Class A common shares.

 

   

The fact that Ingersoll Rand would be more highly leveraged after giving effect to the financing necessary to complete the merger, which may cause the combined company to have reduced financial flexibility for a period of time following the closing.

 

   

The possibility that, notwithstanding the likelihood of the merger being completed, the merger might not be completed and the effect the resulting public announcement of termination of the merger agreement may have on:

 

   

The trading price of Trane’s common stock; and

 

   

Trane’s operating results, particularly in light of the costs incurred in connection with the transaction.

 

   

The risk that various provisions of the merger agreement, including the requirement that Trane must pay to Ingersoll Rand a break-up fee of $315 million if the merger agreement is terminated under certain circumstances, may discourage other parties potentially interested in an acquisition of, or combination with, Trane from pursuing that opportunity. However, Trane’s board of directors determined that such provisions were reasonable and consistent with commercial practice.

 

   

The possible disruption to Trane’s business that may result from the merger and the resulting distraction of the attention of Trane’s management.

 

   

The fact that gains arising from the receipt of the merger consideration would be taxable to Trane’s shareholders for United States federal income tax purposes.

 

   

The requirement that Trane conduct its business only in the ordinary course prior to the completion of the merger and subject to specified restrictions on the conduct of Trane’s business without Ingersoll Rand’s prior consent (which consent may not be unreasonably withheld, delayed or conditioned), which might delay or prevent Trane from undertaking certain business opportunities that might arise pending completion of the merger.

 

   

The risks described in the section entitled “Risk Factors” beginning on page 23.

In addition, Trane’s board of directors was aware of and considered the interests that certain of its directors and executive officers may have with respect to the merger that differ from, or are in addition to, their interests as shareholders of Trane generally, as described in “—Interests of Certain Persons in the Merger” beginning on page 53, which Trane’s board of directors considered as being neutral in its evaluation of the proposed merger.

The foregoing discussion of the information and factors considered by Trane’s board of directors is not exhaustive, but Trane believes it includes all the material factors considered by Trane’s board of directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, Trane’s board of directors did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative or specific weight or values to any of these factors. Rather, Trane’s board of directors viewed its position and recommendation as being based on an overall analysis and on the totality of the information presented to and factors considered by it. In addition, in considering the factors described above, individual directors may have given different weights to different factors. After considering this information, all members of Trane’s board of directors unanimously approved the merger agreement and the merger, and recommended that Trane shareholders adopt the merger agreement.

 

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Opinion of Lazard Frères & Co. LLC

Under an engagement letter dated January 31, 2007, Trane retained Lazard to perform financial advisory services for Trane’s board of directors in connection with the separation plan that Trane announced in February 2007 and, if requested, to render an opinion to the board of directors as to the fairness, from a financial point of view, to holders of Trane’s common stock of the consideration to be paid to such holders in any transaction within the scope of such engagement letter. On December 14, 2007, Trane’s board of directors received an oral opinion from Lazard, which oral opinion was subsequently confirmed by delivery of a written opinion dated December 15, 2007, to the effect that, as of the date of its opinion and subject to the matters described in its opinion, the (x) 0.23 of a Class A common share, par value $1.00 per share, of Ingersoll Rand and (y) $36.50 in cash, per share of Trane common stock (in each case, as may be adjusted in accordance with the merger agreement) to be paid to the holders of Trane’s common stock in the merger was fair, from a financial point of view, to such holders.

The full text of the Lazard opinion is attached as Annex B to this proxy statement/prospectus and is incorporated into this proxy statement/prospectus by reference. The description of the Lazard opinion set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of the Lazard opinion set forth as Annex B. You are urged to read the Lazard opinion in its entirety for a description of the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Lazard in connection with the opinion. Lazard’s opinion is directed to the board of directors and only addresses the fairness to the holders of Trane’s common stock of the consideration to be paid to such holders in the merger from a financial point of view as of the date of the opinion. Lazard’s opinion does not address the relative merits of the merger as compared to any other transaction or business strategy in which Trane might engage or the merits of the underlying business decision by Trane to engage in the merger, and is not intended to and does not constitute a recommendation to any holder of Trane common stock as to how such holder should vote or act with respect to the merger or any matter relating thereto. Lazard’s opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Lazard as of, the date of the Lazard opinion. Lazard assumed no responsibility for updating or revising its opinion based on circumstances or events occurring after the date of the Lazard opinion. Lazard did not express any opinion as to the prices at which shares of Trane common stock or Ingersoll Rand Class A common shares may trade at any time subsequent to the announcement of the merger. The following is only a summary of the Lazard opinion. You are urged to read the entire opinion.

In connection with its opinion, Lazard:

 

   

Reviewed the financial terms and conditions of the merger agreement;

 

   

Analyzed certain publicly available historical business and financial information relating to Trane and Ingersoll Rand;

 

   

Reviewed various financial forecasts and other data provided to Lazard by Trane relating to its business and financial forecasts and other data provided to Lazard by Ingersoll Rand relating to its business, including forecasts and other data after giving effect to the merger;

 

   

Held discussions with members of the senior management of Trane and Ingersoll Rand with respect to the businesses and prospects of Trane and Ingersoll Rand, respectively;

 

   

Reviewed public information with respect to certain other companies in lines of business Lazard believed to be generally relevant in evaluating the businesses of Trane and Ingersoll Rand, respectively;

 

   

Reviewed the financial terms of certain business combinations involving companies in lines of business Lazard believed to be generally relevant in evaluating the business of Trane;

 

   

Reviewed historical stock prices and trading volumes of Trane’s common stock and Ingersoll Rand’s common shares; and

 

   

Conducted such other financial studies, analyses and investigations as Lazard deemed appropriate.

 

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Lazard assumed and relied upon the accuracy and completeness of the foregoing information, without independent verification of such information. Lazard did not conduct any independent valuation or appraisal of any of the assets or liabilities (contingent or otherwise) of Trane or Ingersoll Rand or concerning the solvency or fair value of Trane or Ingersoll Rand, and was not furnished with any such valuation or appraisal. With respect to financial forecasts reviewed by Lazard, Lazard assumed, with the consent of Trane, that they had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the managements of Trane and Ingersoll Rand as to the future financial performance of Trane and Ingersoll Rand, respectively. Lazard assumed no responsibility for and expressed no view as to such forecasts or the assumptions on which they were based.

In rendering its opinion, Lazard assumed with the consent of the board of directors of Trane, that the merger would be consummated on the terms described in the merger agreement, without any waiver or modification of any material terms or conditions of the merger agreement by Trane or Ingersoll Rand. Lazard also assumed, with the consent of Trane, that obtaining the necessary regulatory or third party approvals and consents for the merger will not have an adverse effect on Trane, Ingersoll Rand or the combined company following the merger that would be material for purposes of Lazard’s analyses. Lazard did not express any opinion as to any tax or other consequences that might result from the merger, nor did its opinion address any legal, tax, regulatory or accounting matters, as to which Lazard understood that Trane had obtained such advice as it deemed necessary from qualified professionals. Lazard did not express any view or opinion as to any terms or other aspects of the merger (other than the merger consideration to the extent expressly set forth in Lazard’s opinion). In addition, Lazard expressed no view or opinion as to the fairness of the amount or nature of, or any other aspects relating to, the compensation to any officers, directors or employees of any parties to the merger or class of such persons, relative to the merger consideration or otherwise.

The following is a brief summary of the material financial and comparative analyses that Lazard deemed appropriate for this type of transaction and that were performed by Lazard in connection with rendering its opinion as well as analyses that were presented to the board of directors for informational purposes only but were not material to the rendering of Lazard’s opinion. The summary of Lazard’s analyses described below is not a complete description of the analyses underlying Lazard’s opinion. The preparation of a fairness opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analyses and the application of those methods to the particular circumstances, and, therefore, is not readily susceptible to summary description. In arriving at its opinion, Lazard considered the results of all the analyses and did not attribute any particular weight to any factor or analysis considered by it; rather, Lazard made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of the analyses. For purposes of Lazard’s review, Lazard utilized, among other things, certain projections of the future financial performance of Trane and Ingersoll Rand as described below, as prepared by the management of Trane or Ingersoll Rand, respectively.

In its analyses, Lazard considered industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Trane and Ingersoll Rand. No company, transaction or business used in Lazard’s analyses as a comparison is identical to Trane, Ingersoll Rand or the proposed merger, and an evaluation of the results of those analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies or transactions analyzed. The estimates contained in Lazard’s analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, the estimates used in, and the results derived from, Lazard’s analyses are inherently subject to substantial uncertainty.

 

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The financial analyses summarized below include information presented in tabular format. In order to fully understand Lazard’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Lazard’s financial analyses.

Trane Public Market Analysis

Lazard reviewed and analyzed selected public companies that it viewed as reasonably comparable to Trane based on Lazard’s knowledge of the HVAC industry and the building products industry. In performing these analyses, Lazard reviewed and analyzed certain financial information, implied multiples and market trading data relating to the selected comparable public companies and compared such information to the corresponding information for Trane. Specifically, Lazard compared Trane to (i) a group of industrial companies with similar growth and margin profiles as Trane, (ii) Lennox International Inc. and (iii) a group of building products companies. The industrial group included the following six publicly traded companies:

 

   

Danaher Corporation;

 

   

Honeywell International Inc.;

 

   

ITT Corporation;

 

   

Illinois Tool Works Inc.;

 

   

Rockwell Automation, Inc.; and

 

   

United Technologies Corporation.

The building products group included the following four publicly traded companies:

 

   

Lennox International Inc.;

 

   

Masco Corporation;

 

   

The Black & Decker Corporation; and

 

   

The Stanley Works.

Based on Institutional Brokers’ Estimate System, or IBES, estimates and other public information, Lazard reviewed, among other things, the enterprise value (based on share prices as of December 13, 2007) of Lennox International and of each of the public companies in the industrial and building products groups as a multiple of such company’s estimated earnings before interest, taxes, depreciation and amortization, or EBITDA, for calendar year 2008. A company’s enterprise value is equal to its short and long-term debt plus the market value of its common equity and the value of any preferred stock (at liquidation value), minus its cash and cash equivalents. IBES compiles forward-looking financial estimates made by equity research analysts for U.S. publicly traded companies.

Lazard calculated the following multiples for the aforementioned public trading benchmarks:

 

     Enterprise Value /
2008E EBITDA

Lennox International

   7.0x

Industrial Group (Median)

   9.5x

Building Products Group (Median)

   7.4x

Based on the foregoing, Lazard applied EBITDA multiples of 8.5x to 9.5x to Trane’s calendar year 2008 estimated EBITDA provided by Trane’s management, and determined an implied price per share range for Trane

 

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common stock of $38.75 to $43.40 per share. The per share merger consideration of $48.05 (based on the closing price of Ingersoll Rand’s Class A common shares on December 13, 2007) fell above this range.

Trane Private Market Analysis

Lazard reviewed and analyzed selected precedent merger and acquisition transactions involving companies in the HVAC industry. In performing these analyses, Lazard analyzed certain financial information and transaction multiples relating to companies in the selected transactions and compared such information to the corresponding information for Trane.

Specifically, Lazard reviewed three merger and acquisition transactions since August 2005 involving companies in the HVAC industry for which sufficient public information was available. Based on public filings, press releases and analyst reports, Lazard reviewed, among other things, the acquired company’s enterprise values implied by the precedent transactions as a multiple of its current year estimated EBITDA.

The precedent transactions were (listed by acquiror followed by the acquired company and the date these transactions were publicly announced):

 

   

Hellman & Friedman LLC—Goodman Global, Inc. (10-22-07);

 

   

Daikin Industries, Ltd.—McQuay International (5-18-06); and

 

   

Johnson Controls, Inc.—York International Corporation (8-24-05).

Lazard calculated the following multiples for the above selected transactions used in its analysis:

 

     Enterprise Value /
EBITDA

Hellman & Friedman / Goodman

   10.0x

Daikin / McQuay

   15.3x

JCI / York

   12.0x

Based on the foregoing, Lazard applied EBITDA multiples of 11.0x to 13.0x to Trane’s calendar year 2007 estimated EBITDA provided by Trane’s management, and determined an implied price per share range for Trane common stock of $43.17 to $51.16 per share. The per share merger consideration of $48.05 (based on the closing price of Ingersoll Rand’s Class A common shares on December 13, 2007) fell within this range.

Trane Discounted Cash Flow Analysis

Using projections for fiscal years 2008 through 2010 provided by Trane’s management (which implied a margin improvement of 270 basis points for the period from January 1, 2007 to December 31, 2010) and extrapolations of those projections for fiscal years 2011 and 2012 reviewed and deemed appropriate by Trane management, Lazard performed a discounted cash flow analysis of Trane to calculate the estimated present value of the standalone unlevered, after-tax free cash flows that Trane could generate during fiscal years ending December 31, 2008 through 2012. Lazard also calculated estimated terminal values for Trane by applying a range of EBITDA terminal value multiples of 8.5x to 9.5x to Trane’s fiscal year ended December 31, 2012 estimated EBITDA. The unlevered, after-tax free cash flows and terminal values were discounted to present value using discount rates ranging from 8.0% to 10.0%, which were based on the weighted average cost of capital of selected peer companies that Lazard viewed as reasonably comparable to Trane. Lazard assumed net debt of $155.0 million and a valuation date of December 31, 2007. Based on the foregoing, Lazard calculated an implied price per share range for Trane common stock of $47.20 to $56.16. The per share merger consideration of $48.05 (based on the closing price of Ingersoll Rand’s Class A common shares on December 13, 2007) fell within this range.

Lazard also performed a sensitivity analysis to the projected margin improvement of 270 basis points by performing the foregoing analysis assuming both margin improvements of 135 basis points (in line with what

 

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Trane achieved between 2003 and 2006) and no margin improvements (in line with what Trane achieved from 2001 to 2007) for the period from January 1, 2007 to December 31, 2010. Based on the foregoing and the other assumptions described in the preceding paragraph, Lazard calculated an implied price per share range for Trane common stock of $42 to $50 when assuming margin improvements of 135 basis points and $37 to $44 when assuming no margin improvements. The per share merger consideration of $48.05 (based on the closing price of Ingersoll Rand’s Class A common shares on December 13, 2007) fell within the range when assuming margin improvements of 135 basis points and above the range when assuming no margin improvements.

Other Trane Analyses

The analyses and data described below were presented to the board of directors of Trane for informational purposes only, and were not material to the rendering of Lazard’s opinion.

Present Value of Future Stock Price Analysis

Lazard performed an illustrative analysis of the implied present values of the future stock price of Trane, which is designed to provide an indication of the present value of a theoretical future value of a company’s equity as a function of such company’s estimated future earnings per share, or EPS, and its assumed price to future earnings multiple. For this analysis, Lazard used the financial forecasts for Trane prepared by its management for each of the years in fiscal 2008 to 2010. Lazard first calculated implied per share values for the Trane common stock for each of the fiscal years 2008 to 2010 by applying price to forward earnings multiples of 14.1x (Trane’s price-to-earnings, or P/E, multiple based on its share price as of December 13, 2007 and IBES 2008 estimated EPS as of such date) and 16.1x (the midpoint 2008 P/E multiple implied in Lazard’s public market analysis of Trane), to estimates prepared by Trane’s management of fiscal years 2008 to 2010 EPS. Lazard then discounted those values using an equity discount rate of 12.0%. Assuming a P/E multiple of 14.1x, the foregoing analysis resulted in a range of implied present value per Trane share of $35.85 to $48.03, below the per share merger consideration of $48.05 (based on the closing price of Ingersoll Rand’s Class A common shares on December 13, 2007). Assuming a P/E multiple of 16.1x, the foregoing analysis resulted in a range of implied present value per Trane share of $41.08 to $55.03; the per share merger consideration of $48.05 (based on the closing price of Ingersoll Rand’s Class A common shares on December 13, 2007) was within that range.

Lazard also performed the foregoing analysis using IBES EPS estimates for fiscal year 2008 and 2009, and an estimated 2010 EPS calculated using the long-term IBES EPS growth rate of 13.0%. Lazard also applied price to forward EPS multiples of 14.1x and 16.1x to such EPS estimates to calculate implied per share values for the Trane common stock for the fiscal years 2008 to 2010, and discounted those values using an equity discount rate of 12.0%. Assuming a P/E multiple of 14.1x, the foregoing analysis resulted in a range of implied present value per Trane share of $35.85 to $39.12. Assuming a P/E multiple of 16.1x, the foregoing analysis resulted in a range of implied present value per Trane share of $41.08 to $44.82. The per share merger consideration of $48.05 (based on the closing price of Ingersoll Rand’s Class A common shares on December 13, 2007) was above both ranges.

Present Value of Analyst Target Price Ranges

Lazard also summarized for the board of directors the present value of Wall Street analyst target prices of Trane common stock, assuming a 12% cost of equity. Based on the foregoing, Lazard calculated an implied price per share range for Trane common stock of $34 to $40. The per share merger consideration of $48.05 (based on the closing price of Ingersoll Rand’s Class A common shares on December 13, 2007) fell above this range.

Ingersoll Rand Sum-of-the-Parts Analysis

A sum-of the-parts analysis reviews a business’ operating performance and outlook on a segment-by-segment basis and compares each segment’s performance to a group of publicly traded peer

 

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companies to determine an implied market value for the enterprise as a whole. Lazard performed a sum-of-the-parts analysis for the following operating segments of Ingersoll Rand:

 

   

Climate Control Technologies;

 

   

Industrial Technologies; and

 

   

Security Technologies.

The following table indicates the companies reviewed by Lazard in each of these segments:

 

Climate Control Technologies

  

Industrial Technologies

  

Security Technologies

Dover Corporation

   Atlas Copco    Assa Abloy AB

Illinois Tool Works Inc.

   SPX Corporation    Kaba ILCO

Lenox International Inc.

     

Trane Inc.

     

Based on IBES estimates and other public information, Lazard reviewed the enterprise value of each of the public companies listed above as a multiple of such company’s estimated EBITDA for calendar year 2008. Lazard calculated the following multiples for the aforementioned trading benchmarks:

 

     Enterprise Value /
2008E EBITDA
(Median)

Climate Control Technologies

   8.1x

Industrial Technologies

   9.1x

Security Technologies

   8.7x

Based on the foregoing, Lazard applied EBITDA multiple ranges of 8.0x to 9.0x, 9.5x to 10.5x and 8.0x to 9.0x to Ingersoll Rand’s 2008 estimated EBITDA (based on both research estimates and Ingersoll Rand management projections) for its climate control, industrial and security segments, respectively.

Based on the foregoing analysis:

 

   

Lazard calculated an implied range for Ingersoll Rand Class A common shares of $50.40 to $55.88 based on research estimates. The $50.21 price per Ingersoll Rand Class A common share as of December 13, 2007 was below that range.

 

   

Lazard also calculated an implied range for Ingersoll Rand Class A common shares of $51.36 to $57.05 based on Ingersoll Rand management projections. The $50.21 price per Ingersoll Rand Class A common share as of December 13, 2007 was below that range.

Ingersoll Rand Discounted Cash Flow

Using projections for fiscal years 2008 through 2010 provided by Ingersoll Rand’s management and extrapolations of those projections for fiscal years 2011 and 2012 reviewed and deemed reasonable by Trane management, Lazard performed a discounted cash flow analysis of Ingersoll Rand to calculate the estimated present value of the standalone unlevered, after-tax free cash flows that Ingersoll Rand could generate during fiscal years ending December 31, 2008 through 2012. Lazard calculated estimated terminal values for Ingersoll Rand by applying a range of EBITDA terminal value multiples of 8.5x to 9.5x to Ingersoll Rand’s fiscal year ended December 31, 2012 estimated EBITDA. The unlevered, after-tax free cash flows and terminal values were discounted to present value using discount rates ranging from 8.0% to 10.0%, which were based on the weighted average cost of capital of selected peer companies that Lazard viewed as reasonably comparable to Ingersoll Rand. Based on the foregoing, Lazard calculated an implied price per share range for Ingersoll Rand Class A common shares of $58.80 to $68.08. The $50.21 price per Ingersoll Rand Class A common share as of December 13, 2007 was below that range.

 

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Lazard also performed the foregoing analysis based on Wall Street equity research reports. Based on the foregoing and the other assumptions described in the preceding paragraph, Lazard calculated an implied price per share range for Ingersoll Rand Class A common shares of $52.17 to $60.19. The $50.21 price per Ingersoll Rand Class A common share as of December 13, 2007 was below that range.

Other Ingersoll Rand Analyses

The analyses and data described below were presented to the board of directors of Trane for informational purposes only, and were not material to the rendering of Lazard’s opinion.

Present Value of Analyst Target Price Ranges

Lazard also summarized for the board of directors the present value of Wall Street analyst target prices for Ingersoll Rand Class A common shares, assuming a 12% cost of equity. Based on the foregoing, Lazard calculated an implied price per share range for Ingersoll Rand Class A common shares of $46 to $54. The $50.21 price per Ingersoll Rand Class A common share as of December 13, 2007 was within that range.

52-Week Trading Range

Lazard also summarized for the board of directors the 52-week trading range of Ingersoll Rand Class A common shares. The 52-week low price of Ingersoll Rand Class A common shares was $38.03, occurring on December 26, 2006, and the 52-week high price of Ingersoll Rand Class A common shares was $56.66, occurring on July 17, 2007. The $50.21 price per Ingersoll Rand Class A common share as of December 13, 2007 was within that range.

Pro Forma Merger Analysis

Lazard analyzed the potential pro forma effect of the merger on Ingersoll Rand’s projected EPS for calendar years 2008 and 2009 using Ingersoll Rand and Trane management estimates. For purposes of this analysis, Lazard assumed, among other things, pre-tax run rate synergies as provided by Ingersoll Rand management. Lazard noted that the merger is expected to be accretive to Ingersoll Rand IBES EPS in fiscal years 2008 and 2009.

Miscellaneous

Lazard’s opinion and financial analyses were not the only factors considered by Trane’s board of directors in its evaluation of the merger and should not be viewed as determinative of the views of Trane’s board of directors or Trane’s management.

In connection with Lazard’s services as financial advisor to Trane’s board of directors, Trane has agreed to pay to Lazard an aggregate fee currently estimated to be approximately $20 million (based on the closing price of Ingersoll Rand Class A common shares as of December 13, 2007 and Trane’s latest balance sheet as of the date of this proxy statement/prospectus), a portion of which was payable upon the rendering of Lazard’s opinion and a substantial portion of which is contingent upon the closing of the merger. Trane has also agreed to reimburse Lazard for its reasonable expenses, including the expenses of legal counsel, and to indemnify Lazard and related parties against liabilities, including liabilities under the federal securities laws, arising out of its engagement. Lazard in the past has provided investment banking services to Trane and certain of its affiliates, for which Lazard has received compensation. In 2007, Lazard acted as financial advisor to Trane in connection with the spin-off of its Vehicle Control Systems business, and the sale of its Bath and Kitchen business. In addition, in the ordinary course of their respective businesses, affiliates of Lazard and LFCM Holdings LLC (an entity indirectly owned in large part by managing directors of Lazard) may actively trade securities of Trane/or the securities of Ingersoll Rand and certain of their respective affiliates for their own accounts and for the accounts of their

 

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customers and, accordingly, may at any time hold a long or short position in such securities. The issuance of Lazard’s opinion was approved by the Opinion Committee of Lazard.

Lazard is an internationally recognized investment banking firm and is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, leveraged buyouts, and valuations for real estate, corporate and other purposes. Lazard was selected to act as investment banker to the board of directors of Trane because of its expertise and its reputation in investment banking and mergers and acquisitions.

Financial Projections

In the normal course, Trane’s senior management prepares a long-term strategic plan containing internal projections for the upcoming three-year period that is made available to Trane’s board of directors and senior management. Additionally, Trane’s senior management prepares an annual operating plan in the fall of each year, where detailed strategies are identified for the next calendar year and based on the annual operating plan, the financial projections for the next calendar year that are contained in the strategic plan are refined and updated. In connection with the transaction, Trane’s board of directors and Lazard had received and considered such projections for 2008-2010. In addition, certain financial projections based on the strategic plan for the three-year period 2008-2010 were provided to Ingersoll Rand and its financial advisors in connection with their consideration of the merger.

The projections set forth below are included in this proxy statement/prospectus to provide Trane shareholders access to certain nonpublic information considered by Trane’s board of directors during its evaluation of the merger and Lazard in the preparation of its opinion that the consideration to be paid to the holders of Trane’s common stock in the merger was fair, from a financial point of view, to such holders. The inclusion of this information should not be regarded as an indication to any shareholder that Trane’s board of directors or any other recipient of this information considered, or now considers, it to be predictive of actual future results. The projections reflect numerous estimates and assumptions with respect to industry performance, general business, economic, regulatory, market and financial conditions, as well as matters specific to Trane’s business, many of which are beyond Trane’s control. As a result, there can be no assurance that the projected results will be realized or that actual results will not be significantly higher or lower than projected. Since the projections cover multiple years, such information by its nature becomes less predictive with each successive year. These financial projections were prepared for internal use and not with a view toward public disclosure or toward complying with generally accepted accounting principles in the United States, which we refer to in this proxy statement/prospectus as GAAP, the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The projections included in this proxy statement/prospectus were prepared by, and are the responsibility of, Trane’s management. We assume no responsibility (nor do we as a normal course) to update these projections, other than for purposes of the annual operating plan described below. Neither Trane’s independent registered public accounting firm, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information. The Ernst & Young LLP reports incorporated by reference in this proxy statement/prospectus relate to Trane’s historical financial information. They do not extend to the projected financial information and should not be read to do so. Furthermore, the financial projections do not take into account any circumstances or events occurring after the date the projections were prepared that were unforeseen by Trane’s management at the time of preparation. Trane has made publicly available its actual results of operations for the year ended December 31, 2007. Trane shareholders should review Trane’s Annual Report on Form 10-K for the year ended December 31, 2007 to obtain this information. See “Where You Can Find More Information” beginning on page 124. Readers of this proxy statement/prospectus are cautioned not to place undue reliance on the projections set forth below. No one has made or makes any representation to any shareholder regarding the information included in these

 

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projections. The inclusion of projections in this proxy statement/prospectus should not be regarded as an indication that such projections will be an accurate prediction of future events, and they should not be relied on as such.

A summary of the projections reflected in Trane’s strategic plan that was delivered to Trane’s board of directors as part of its strategic planning and as one of the factors considered by Trane’s board of directors in connection with their approval of the merger agreement is set forth below. These projections were prepared by Trane management in July 2007, and, as described above, following the completion of the annual operating plan, the July projections were updated for internal purposes in October 2007 to reflect developments outlined in the annual operating plan.

Trane Inc.

Summary Projections

 

     For the Year Ending
December 31,
 
     2008     2009     2010  
     ($ in millions)  

Revenues:

   $ 7,950     $ 8,738     $ 9,525  

EBITDA(1)(3):

      

Strategic Plan

   $ 940     $ 1,123     $ 1,270  

% Margin

     11.8 %     12.9 %     13.3 %

EBIT(2)(3):

      

Strategic Plan

   $ 827     $ 1,005     $ 1,150  

% Margin

     10.4 %     11.5 %     12.1 %

 

(1) EBITDA is defined as net income before interest expense, income taxes, depreciation and amortization, calculated after corporate expenses.
(2) EBIT is defined as net income before interest expenses and income taxes, calculated after corporate expenses.
(3) EBITDA and EBIT are not measures of performance under GAAP, and should not be considered as substitutes for measurements prepared in accordance with GAAP. Management analyzes EBIT and EBITDA because such measures are useful to them in understanding operational performance of the business.

The projections set forth above represent those included in the strategic plan, which in the case of 2008 were updated to give effect to the annual operating plan in October 2007 as described above (the “October Projections”). In connection with Ingersoll Rand’s due diligence process, Trane provided to Ingersoll Rand certain financial projections for the three-year period 2008-2010. The summary financial projections provided to Ingersoll Rand were substantially the same as those reflected in management’s original strategic plan, as updated to give effect to the adjustments made in the October Projections. However, the projections provided to Ingersoll Rand included, as an identified line-item, a lower level of contingency reserve to reflect the risks associated with the strategic plan than had been included in the October Projections. The lower level of contingency reserve was utilized in the projections delivered to Ingersoll Rand because management believed Ingersoll Rand would apply its own more conservative level of contingency reserve to the projections. The lower contingency reserve included in the projections delivered to Ingersoll Rand resulted in EBITDA and EBIT of $951 million, $1,168 million and $1,375 million (in respect of EBITDA) and $827 million, $1,023 million and $1,213 million (in respect of EBIT), in each case, for the years ending December 31, 2008, 2009 and 2010, respectively. Trane’s board of directors was aware of and took into account the projections provided to Ingersoll Rand as well as the October Projections prior to approving the merger agreement on December 14, 2007.

Neither Ingersoll Rand nor its management participated in preparing, nor expresses any view on, the financial forecasts reflected in the October Projections, or the assumptions underlying such information. The

 

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summary of the October Projections is not included in this proxy statement/prospectus in order to induce any Trane shareholder to vote in favor of the merger or to impact any investment decision with respect to Ingersoll Rand common stock.

BY INCLUDING IN THIS PROXY STATEMENT/PROSPECTUS A SUMMARY OF THE INTERNAL FINANCIAL FORECASTS REFLECTED IN THE OCTOBER PROJECTIONS, NEITHER TRANE NOR INGERSOLL RAND UNDERTAKES ANY OBLIGATION TO UPDATE, OR PUBLICLY DISCLOSE ANY UPDATE TO, THE FINANCIAL FORECASTS TO REFLECT CIRCUMSTANCES OR EVENTS, INCLUDING UNANTICIPATED EVENTS, THAT MAY HAVE OCCURRED OR THAT MAY OCCUR AFTER THE PREPARATION OF OCTOBER PROJECTIONS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE FINANCIAL FORECASTS ARE SHOWN TO BE IN ERROR.

Neither Trane’s nor Ingersoll Rand’s independent registered public accounting firm, nor any other independent accountants, have examined, compiled or otherwise performed any procedures with respect to the prospective financial information contained in these internal financial forecasts nor have they expressed any opinion or given any other form of assurance on this information or its achievability.

Ingersoll Rand’s Reasons for the Merger

The Ingersoll Rand board of directors, in reaching its decision to approve the merger agreement and the transactions contemplated by the merger agreement, considered the following factors:

 

   

Trane’s financial condition, results of operations, business, competitive position, reputation, pending legal proceedings and business prospects, as well as current industry, economic, government, regulatory and market conditions and trends.

 

   

The Ingersoll Rand board of directors’ assessment of the complementary strengths of each of the companies. The Ingersoll Rand board of directors also reviewed information with respect to the prospects of the combined company.

 

   

Trane’s strategic attractiveness following the recent divestitures of its bath and kitchen and its vehicle control systems businesses, and Ingersoll Rand’s ability to make a strategic acquisition using the proceeds from its recent divestitures.

 

   

That, because the exchange ratio under the merger agreement is fixed (will not be adjusted for fluctuations in the market price of Ingersoll Rand Class A common shares or Trane common stock), the per share value of the merger consideration to be paid to Trane stockholders on completion of the merger could be significantly more or less than its implied value immediately prior to the announcement of the merger agreement.

 

   

The terms and conditions of the merger agreement, including the form and amount of the consideration and the representations, warranties, covenants, conditions to closing and termination rights contained in that agreement.

In view of the number and variety of factors considered in connection with its evaluation of the merger, the Ingersoll Rand board of directors did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors it considered in reaching its determination.

Interests of Certain Persons in the Merger

In considering the recommendation of Trane’s board of directors with respect to the merger agreement, shareholders should be aware that Trane’s executive officers and the members of Trane’s board of directors have interests in the merger that may be different from, or in addition to, the interests of the other shareholders of Trane generally. Trane’s board of directors was aware of these interests and considered them, among other matters, in making their recommendation.

 

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Appointment of Directors or Officers

The merger agreement provides that, upon completion of the merger, Ingersoll Rand will appoint two members of Trane’s current board of directors, to be mutually agreed upon by Trane and Ingersoll Rand prior to the closing, to the Ingersoll Rand board of directors, and, following the merger, Ingersoll Rand has agreed to take all actions that are necessary to ensure that the two Trane designees are nominated for election to the Ingersoll Rand board of directors at each of the 2008, 2009 and 2010 annual shareholders meeting of Ingersoll Rand. As of the date of this proxy statement/prospectus no determination has been made as to the identity of the two Trane designees that will be appointed to the Ingersoll Rand board of directors. In addition, while no determination has been made as of the date of this proxy statement/prospectus, it is possible that certain executive officers of Trane will be offered positions with Ingersoll Rand effective upon completion of the merger.

Treatment of Trane Equity Awards

Under Trane’s 2002 Omnibus Plan, in the event of a change of control of Trane (the definition of which would be triggered by the merger), any outstanding stock options issued under the plan will become immediately vested and exercisable and the restricted period shall lapse as to any outstanding restricted stock units. The executive officers of Trane as a group held an aggregate of 641,838 unvested Trane stock options and 21,032 unvested restricted stock units as of February 25, 2008. All of these awards will become fully vested at the time of the merger. All of Mr. Poses’ equity awards are currently fully vested.

The following table sets forth the number of unvested stock options to acquire Trane common stock held by Trane’s executive officers as of February 25, 2008 and the approximate value of those unvested options (based on an assumed value per share of Trane common stock immediately prior to the closing of the merger of $45.05, which was the closing price per share of Trane common stock on February 25, 2008, which value may vary):

 

Name

   Unvested Options
(No. of Shares)
   Weighted Average
Exercise Price
   Approximate Value of
Unvested Options

G. Peter D’Aloia

   300,000    $ 39.07    $ 1,794,000

Lawrence B. Costello

   75,000    $ 33.53    $ 864,000

Mary Elizabeth Gustafsson

   50,001    $ 33.53    $ 576,012

W. Craig Kissel

   125,001    $ 33.53    $ 1,440,012

David R. Pannier

   50,001    $ 33.53    $ 576,012

Brad M. Cerepak

   18,334    $ 34.20    $ 198,924

David S. Kuhl

   12,501    $ 33.53    $ 144,012

Edward Schlesinger

   11,000    $ 27.81    $ 189,640

The following table sets forth the number of unvested restricted stock units with respect to Trane common stock held by Trane’s executive officers as of February 25, 2008 and the approximate value of those unvested restricted stock units (based on an assumed value per share of Trane common stock immediately prior to the closing of the merger of $45.05, which was the closing price per share of Trane common stock on February 25, 2008, which value may vary):

 

Name

   Unvested Restricted
Stock Units
(No. of Shares)
   Approximate Value of
Unvested Restricted
Stock Units

G. Peter D’Aloia

   —        —  

Lawrence B. Costello

   —        —  

Mary Elizabeth Gustafsson

   —        —  

W. Craig Kissel

   —        —  

David R. Pannier

   —        —  

Brad M. Cerepak

   9,377    $ 422,434

David S. Kuhl

   6,225    $ 280,436

Edward Schlesinger

   5,430    $ 244,622

 

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In addition to the unvested Trane stock options described above, Trane’s executive officers and directors also hold vested options to acquire Trane common stock. The executive officers and directors have already earned the right to exercise these options; consequently, the merger will not affect the vesting of the options. The following table sets forth the number of vested stock options to acquire Trane common stock held by Trane’s executive officers and directors as of February 25, 2008 and the approximate value of those vested options (based on an assumed value per share of Trane common stock immediately prior to the closing of the merger of $45.05, which was the closing price per share of Trane common stock on February 25, 2008, which value may vary):

 

Name

   Vested Options
(No. of Shares)
   Weighted Average
Exercise Price
   Approximate Value of
Vested Options

Frederic M. Poses

   4,717,653    $ 13.72    $ 147,804,068

G. Peter D’Aloia

   750,000    $ 23.70    $ 16,012,500

Lawrence B. Costello

   396,461    $ 23.12    $ 8,694,390

Mary Elizabeth Gustafsson

   122,199    $ 28.62    $ 2,007,730

W. Craig Kissel

   781,698    $ 20.91    $ 18,870,190

David R. Pannier

   396,203    $ 19.27    $ 10,265,620

Brad M. Cerepak

   106,666    $ 23.25    $ 2,325,319

David S. Kuhl

   44,999    $ 25.15    $ 895,480

Edward Schlesinger

   26,000    $ 27.68    $ 451,620

Steven E. Anderson

   44,700    $ 24.82    $ 904,281

Jared L. Cohon

   89,700    $ 18.46    $ 2,385,123

Paul J. Curlander

   21,000    $ 30.23    $ 311,220

Steven F. Goldstone

   44,700    $ 24.82    $ 904,281

Kirk S. Hachigian

   10,500    $ 29.80    $ 160,125

Edward E. Hagenlocker

   49,701    $ 23.74    $ 1,059,128

Ruth Ann Marshall

   31,800    $ 28.38    $ 530,106

Dale F. Morrison

   14,646    $ 30.21    $ 217,347

Frederic M. Poses, G. Peter D'Aloia, Mary Elizabeth Gustafsson, Lawrence B. Costello, W. Craig Kissel and David R. Pannier, whom we refer to as the “specified option holders,” have agreed to elect to fully convert all of such individuals’ Trane stock options into options to acquire Ingersoll Rand Class A common shares in the merger (except to the extent it is necessary to have such options cancelled in exchange for a cash payment (or “cashed-out”) in order to ensure that the maximum amount of rolled-over options (as described in the section entitled “The Merger Agreement—Treatment of Stock Options” beginning on page 69 and the section entitled “The Stock Option Election” beginning on page 90) is not exceeded). However, options issued under Trane’s Stock Incentive Plan may be, at the election of the option holder, relinquished to Ingersoll Rand (as successor following the merger) in exchange for a cash payment following the merger at any time within the sixty day period after the special meeting of Trane shareholders in which the merger was approved. This cash payment would be equal to the difference between the exercise price of the option and fair market value (which, for options that were vested prior to 2005, is defined to mean the highest price paid for Trane shares in the merger, measured at the time of closing of the merger). As of February 25, 2008, the executive officers, as a group, hold 3,507,517 (including 53,347 ISOs) options which will have this “cash-out” right following the merger.

Treatment of WABCO Equity Awards

Certain of Trane’s executive officers and directors hold unvested options to acquire shares of common stock of WABCO Holdings Inc., which was spun-off from Trane on July 31, 2007. Such WABCO options continue to vest based on the executive officer’s continued employment with Trane and the director’s continued service on Trane’s board of directors, as applicable. Pursuant to the terms of such WABCO options, if the employment of the executive officer with Trane or the service of the director on Trane’s board of directors, as applicable, is terminated under certain circumstances following a change in control of Trane (the definition of which will be triggered by the merger), such executive officer’s or director’s WABCO options will become immediately vested and exercisable. Following the merger, continued service with Ingersoll Rand and its subsidiaries (including Trane) will be treated as continued service for vesting and termination of these WABCO options.

 

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The following table sets forth the number of unvested WABCO options held by Trane’s executive officers and directors as of February 25, 2008 and the approximate value of those unvested options (based on $43.41, which was the closing price of shares of WABCO common stock on February 25, 2008):

 

Name

   Unvested Options
(No. of Shares)
   Weighted Average
Exercise Price
   Approximate Value of
Unvested Options

G. Peter D’Aloia

   49,999    $ 41.62    $ 89,498

Lawrence B. Costello

   25,000    $ 41.62    $ 44,750

Mary Elizabeth Gustafsson

   16,668    $ 41.62    $ 29,836

W. Craig Kissel

   41,667    $ 41.62    $ 74,584

David R. Pannier

   16,666    $ 41.62    $ 29,832

Brad M. Cerepak

   6,110    $ 42.46    $ 5,804

David S. Kuhl

   4,167    $ 41.62    $ 7,459

Edward Schlesinger

   3,667    $ 34.53    $ 32,563

Steven E. Anderson

   3,499    $ 41.62    $ 6,263

Jared L. Cohon

   3,500    $ 41.62    $ 6,265

Paul J. Curlander

   3,500    $ 41.62    $ 6,265

Steven F. Goldstone

   3,500    $ 41.62    $ 6,265

Kirk S. Hachigian

   3,500    $ 41.62    $ 6,265

Edward E. Hagenlocker

   3,500    $ 41.62    $ 6,265

Ruth Ann Marshall

   3,499    $ 41.62    $ 6,263

Treatment of Cash Incentive Awards

Under Trane’s 2002 Omnibus Plan, upon a change of control, all performance periods for annual incentive and long-term incentive awards shall end, and awards shall become payable at target levels, prorated for the portion of the performance period completed prior to the change of control. Each of Trane’s executive officers is expected to have outstanding long-term awards and annual awards with respect to fiscal year 2008 at the time of the merger, which awards will pay out as described in the preceding sentence. The aggregate amount of such payments is expected to be approximately $6.73 million, assuming a closing date of May 31, 2008.

The following table sets forth the amounts expected to be paid to Trane’s executive officers in accordance with the pro-rated annual and long-term bonus payments described in the preceding paragraph, assuming the merger occurs on May 31, 2008:

 

Name

   Approximate Amount of
Pro-Rata Payment for
Annual and Long-Term
Incentive Awards

Frederic M. Poses(1)

   $ 1,700,000

G. Peter D’Aloia

   $ 1,280,000

Lawrence B. Costello

   $ 902,153

Mary Elizabeth Gustafsson

   $ 610,104

W. Craig Kissel

   $ 1,120,000

David R. Pannier

   $ 573,417

Brad M. Cerepak

   $ 322,208

David S. Kuhl

   $ 123,355

Edward Schlesinger

   $ 99,104

 

(1) Represents pro-rata payment on long-term incentive awards for periods through December 31, 2007. Mr. Poses is not entitled to payments with respect to subsequent periods (please see “—Agreement with Mr. Poses” on page 58).

 

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Officers’ Severance Plan

Certain of Trane’s executive officers (Messrs. D’Aloia, Kissel, Pannier and Costello and Ms. Gustafsson) are eligible to participate in Trane’s Corporate Officers’ Severance Plan (“Officers’ Severance Plan”). Mr. Poses will not be eligible to receive any severance payments in connection with the merger. The Officers’ Severance Plan provides that any eligible officer whose employment is involuntarily terminated by Trane without cause or who leaves Trane for Good Reason within two years following the occurrence of a change of control (the definition of which would be triggered by the merger) will be paid a lump sum amount equal to two times the executive officer’s annual base salary at the time of termination or departure, plus one times such officer’s then current annual incentive target award, plus one proration of the current annual incentive target award (but, only to the extent not payable under the Annual Incentive Plan or otherwise). In addition, group life and group medical coverage will be continued for up to 24 months following the officer’s termination or departure. The Officers’ Severance Plan also provides for reimbursement of financial planning services of up to $5,000 if such expenses are submitted within one year of the executive’s termination of employment. For purposes of the Officers’ Severance Plan, “Good Reason” is defined to mean the occurrence of any of the following events: (a) an adverse change in the executive’s position or status as an executive or a material diminution in the executive’s duties, authority, or responsibilities; assignment of any duties or responsibilities to executive which are inconsistent with executive’s status or position; or removal of the executive from or any failure to reappoint or reelect executive to his or her position(s) (except in connection with the termination of his or her employment for cause, disability or retirement or as result of his or her death or by him or her other than for Good Reason); (b) relocation of the executive’s principal place of employment to a location that is at least 30 miles further from the executive’s principal residence than his current principal place of employment; (c) a reduction by Trane in the executive’s base salary; (d) the taking of any action by Trane that would substantially diminish the aggregate projected value of the executive’s award opportunities under Trane’s incentive plans in which he or she was participating at the time of the taking of such action; (e) the taking of any action by Trane that would substantially diminish the aggregate value of the benefits provided to the executive under Trane’s medical, health, accident, disability, life insurance, thrift and retirement plans in which he or she was participating at the time of the taking of such action; or (f) any purported termination by Trane of the executive’s employment that is not a termination for cause provided that this shall not include termination due to retirement. In all cases a termination for Good Reason shall not have occurred unless the executive gives the company written notice of the event constituting Good Reason within sixty (60) days of its occurrence and the company fails to cure the event within thirty (30) days of receipt of such notice. The Officers’ Severance Plan also entitles an executive to receive an additional “excise tax gross-up” payment following a change of control, if required, to compensate the executive for any excise taxes imposed under the Internal Revenue Code on certain compensation received on account of a change of control. In the event that, immediately following the merger, each of Trane’s executive officers was terminated in a manner which entitled such executive to benefits under the Officers’ Severance Plan, the executive officers would receive payments and benefits with an aggregate value of approximately $6.04 million.

The following table sets forth the approximate amount of payments and the value of benefits that the executive officers who participate in the Officers’ Severance Plan would receive if each such executive officer’s employment were to be terminated immediately following the merger, assuming the merger occurs on May 31, 2008:

 

Name

   Approximate Cash
Severance Benefit
(including any
gross-up payments)
   Approximate Value of
Continued Welfare
Benefits and Financial

Planning Reimbursement

G. Peter D’Aloia

   $ 1,620,000    $ 22,447

Lawrence B. Costello

   $ 1,147,500    $ 21,713

Mary Elizabeth Gustafsson

   $ 967,250    $ 27,258

W. Craig Kissel

   $ 1,147,500    $ 29,166

David R. Pannier

   $ 765,000    $ 20,914

 

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Change of Control Severance Plan

Trane’s other executives (not including Mr. Poses, but including the other executive officers listed below) participate in Trane’s Change of Control Severance Plan. The Change of Control Severance Plan provides severance benefits to executives in the event their employment is involuntarily terminated without cause or they leave for good reason within two years of the occurrence of a change of control (the definition of which would be triggered by the merger). Severance benefits provided include one year’s base salary and one current Annual Incentive Plan target award (but only to the extent not payable under the Annual Incentive Plan or otherwise), continuation of group medical and group life coverage for up to one year and outplacement services. Payments under the Change of Control Severance Plan will be reduced to the extent necessary to prevent them being subject to excise taxes under the Internal Revenue Code.

The following table sets forth the approximate amount of payments and the value of benefits that the listed executive officers (each of whom participate in the Change of Control Severance Plan) would receive if each such executive officer’s employment were to be terminated immediately following the merger, assuming the merger occurs on May 31, 2008:

 

Name

   Approximate Cash
Severance Benefit
   Approximate Value of
Continued Welfare
Benefits and
Outplacement

Brad M. Cerepak

   $ 457,250    $ 21,058

David S. Kuhl

   $ 294,298    $ 21,031

Edward Schlesinger

   $ 261,906    $ 20,961

In addition to Trane’s existing severance arrangements, the merger agreement permits Trane to implement an enhanced severance commitment in connection with the merger. The enhanced severance commitment does not apply to Trane’s executive officers. Additionally, the merger agreement permits Trane to establish a cash retention pool, up to an estimated $20 million in the aggregate to be available for awards consistent with past practice to employees. Of the $20 million retention pool, $4 million is expected to be used for short term retention bonuses for key individuals necessary to complete the merger transaction and Trane has the authority to determine the recipients, size and terms of the awards within the $4 million pool, subject to good faith consultation with Ingersoll Rand and an aggregate maximum award of one times the recipient’s annual base compensation. Messrs. Poses, D’Aloia, Costello, Kissel and Pannier and Ms. Gustafsson, who are referred to as the specified option holders, are not eligible for awards from the $4 million short-term retention pool. The remaining $16 million of the retention pool will be used for long-term retention for Trane employees that are expected to be employed by Ingersoll Rand following the merger, and Trane and Ingersoll Rand will mutually agree as to the recipients, size and term of such awards, provided that the awards shall not exceed an aggregate maximum award of two times the recipient’s annual base compensation.

Agreement with Mr. Poses

At the time the merger agreement was executed, Trane entered into an agreement with Frederic M. Poses to extend his term of employment as Chief Executive Officer for a period up to and including June 30, 2008. Under this extension, Mr. Poses will continue to serve as Chief Executive Officer of Trane until June 30, 2008 or such earlier date as Trane’s board of directors specifies. Commencing January 1, 2008, Mr. Poses’ base salary was increased to a monthly rate of $416,666.66. If Mr. Poses employment terminates prior to March 31, 2008 for any reason other than his voluntary termination or a termination by the Company for “cause” (as such term is defined in the Company’s Corporate Officers Severance Plan), Trane will pay him an amount equal to the excess, if any, of $1,250,000 over the amount actually paid to Mr. Poses as base salary for his services in 2008. Mr. Poses will also continue to participate in the employee benefit plans and programs generally made available to employees of Trane and shall receive such perquisites as are otherwise made available to senior officers of Trane. Mr. Poses will not receive any other compensation for his services during this extended period of employment. He will not receive or be eligible for any other bonus or supplemental cash payment, any grant or any additional service

 

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credits in respect of any long-term incentive plan and will not be granted any additional stock option or other equity or equity-based grants. At the end of such services, regardless of when occurring or the reason for his termination, Mr. Poses will not be entitled to any severance or termination benefits other than the minimum payment described above if his continued period of employment ends before March 31, 2008.

Agreement with Mr. D’Aloia

Trane has an employment letter agreement with Mr. D'Aloia, pursuant to which Trane has agreed to make annual option grants to Mr. D’Aloia during his employment. Under the merger agreement, Trane is permitted to grant options to purchase 150,000 shares of Trane common stock to Mr. D’Aloia prior to the closing of the merger, and on February 6, 2008, Trane granted Mr. D’Aloia 150,000 options to purchase Trane common stock. Any such options would have a per share exercise price equal to the fair market value of Trane shares at the time of grant and would be subject to the same treatment as other Trane stock options held by Mr. D’Aloia in the merger (see the section entitled “The Merger Agreement—Treatment of Stock Options” beginning on page 69).

Supplemental Retirement and Deferred Compensation Plans

Trane maintains a supplemental executive retirement plan (“SERP”) in which certain of the executive officers participate. The SERP provides that any participant in the SERP whose employment is terminated without cause or who terminates their employment for Good Reason within two years following a change of control (including the merger) shall receive two years additional age and service credit in calculating their plan benefit under the SERP’s benefit formula. Mr. Poses is not eligible for this enhancement. However, if the other executive officers were terminated under the circumstances described in the preceding sentence, they would be entitled to additional benefits under the SERP valued at approximately $3.8 million.

The following table sets forth the value of additional benefits under the SERP which the listed officer would receive if he or she were to be terminated following the merger and the amount of unvested contributions to the Trane deferred compensation plan, which will vest upon the merger:

 

Name

   Value of Enhanced
SERP Benefit
   Unvested Deferred
Compensation ($)

G. Peter D’Aloia

   $ 1,060,649    —  

Lawrence B. Costello

   $ 839,724    —  

Mary Elizabeth Gustafsson

   $ 102,236    —  

W. Craig Kissel

   $ 1,246,968    —  

David R. Pannier

   $ 549,790    —  

Director Equity Awards

The non-employee directors of Trane hold 88,144 unvested Trane stock options as of February 25, 2008. Pursuant to the terms of Trane’s 2002 Omnibus Incentive Plan, each of these Trane stock options will become fully vested upon the merger as described above.

 

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The following table sets forth the number of unvested Trane options to acquire Trane common stock held by Trane’s non-employee directors as of February 25, 2008 and the approximate value of those unvested options (based on an assumed value per share of Trane common stock immediately prior to the closing of the merger of $45.05, which was the closing price per share of Trane common stock on February 25, 2008, which value may vary):

 

Name

   Unvested Options
(No. of Shares)
   Per Share
Exercise Price 
   Approximate Value
of Unvested Options 

Steven E. Anderson

   10,500    $ 33.53    $ 120,960

Jared L. Cohon

   10,500    $ 33.53    $ 120,960

Paul J. Curlander

   10,500    $ 33.53    $ 120,960

Steven F. Goldstone

   10,500    $ 33.53    $ 120,960

Kirk S. Hachigian

   10,500    $ 33.53    $ 120,960

Edward E. Hagenlocker

   10,500    $ 33.53    $ 120,960

Ruth Ann Marshall

   10,500    $ 33.53    $ 120,960

Dale F. Morrison

   14,644    $ 33.99    $ 161,963

Indemnification and Insurance of Trane Directors and Executive Officers

Ingersoll Rand has agreed to cause the surviving corporation in the merger to assume and perform the obligations with respect to indemnification and exculpation with respect to all claims, liabilities, losses, damages, judgments, fines, penalties, costs and expenses existing in favor of all current and former officers and directors of Trane as provided in the certificate of incorporation and bylaws of Trane, in each case as in effect on the date of the merger agreement.

The merger agreement also provides that Ingersoll Rand will maintain Trane’s current directors’ and officers’ liability insurance policies, or policies containing terms and conditions, including with respect to coverage and amounts, no less favorable to the covered parties than the current policy, for six years after completion of the merger. Alternatively, Trane may put in place prior to the closing a single premium tail policy or Ingersoll Rand may substitute Trane’s policies to an insurance carrier with the same or better credit rating as Trane’s current insurance carrier. In each case, the premiums are subject to specified caps.

Manner and Procedure for Exchanging Shares of Trane Common Stock; No Fractional Shares

The conversion of Trane common stock into the right to receive the merger consideration will occur automatically at the effective time of the merger. As soon as reasonably practicable after the effective time of the merger and in no event later than three business days following the effective time, Ingersoll Rand’s exchange agent will send a letter of transmittal to each former holder of record of shares of Trane common stock. The transmittal letter will contain instructions for obtaining the merger consideration, including the Ingersoll Rand Class A common shares, the cash portion of the merger consideration, any dividends or distributions payable pursuant to the merger agreement and cash for any fractional Ingersoll Rand Class A common shares, in exchange for shares of Trane’s common stock. Trane’s shareholders should not return stock certificates with the enclosed proxy card.

After the effective time of the merger, each certificate that previously represented shares of Trane common stock will no longer be outstanding, will be automatically canceled and will cease to exist and will represent only the right to receive the merger consideration as described above.

Until holders of certificates previously representing Trane common stock have surrendered those certificates to the exchange agent for exchange, those holders will not receive dividends or distributions on the Ingersoll Rand Class A common shares into which those shares have been converted with a record date after the effective time of the merger and will not receive cash for any fractional Ingersoll Rand Class A common shares. When

 

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holders surrender those certificates, they will receive any dividends on Ingersoll Rand Class A common shares with a record date after the effective time of the merger and a payment date on or prior to the date of surrender and any cash for fractional Ingersoll Rand Class A common shares, in each case without interest.

In the event of a transfer of ownership of Trane common stock that is not registered in Trane’s transfer agent’s records, payment of the merger consideration as described above will be made to a person other than the person in whose name the certificate so surrendered is registered if the certificate is properly endorsed or otherwise is in proper form for transfer; and the person requesting the exchange pays any transfer or other taxes resulting from the payment of the merger consideration as described above to a person other than the registered holder of the certificate.

Trane shareholders will not receive any fractional Ingersoll Rand Class A common shares pursuant to the merger. Instead of any fractional shares, shareholders will be paid an amount in cash for such fraction calculated by multiplying (A) the fractional share interest to which such holder (after taking into account all shares of Trane’s common stock formerly represented by all certificates surrendered by such holder) would otherwise be entitled by (B) the per share closing price of Ingersoll Rand Class A common shares on the last trading day immediately prior to the closing of the merger, as such price is reported on the NYSE Composite Transaction Tape (as reported by Bloomberg Financial Markets or such other source as the parties shall agree in writing prior to the effective time).

Governmental and Regulatory Approvals

U.S. Antitrust Filing. Under the HSR Act and related regulations the merger may not be completed unless the parties to the transaction file all Premerger Notification and Report forms with the U.S. Department of Justice and the Federal Trade Commission that may be required and the applicable waiting period has either expired or been earlier terminated. On January 14, 2008, Trane and Ingersoll Rand filed all required premerger reporting forms under the HSR Act and early termination of the applicable waiting period was granted on January 31, 2008.

Other Regulatory Approvals. The merger is also subject to, and the parties’ obligations to complete the merger are conditioned on, approval and clearance by the governmental authorities in the European Union, China, Canada, South Africa and South Korea under the antitrust and competition laws and certain other laws of those jurisdictions. The competition filing required under the European Community Council Regulations was made by the parties on March 3, 2008. The competition filing required in China was made by the parties on February 2-3, 2008. The competition filing required in Canada was made by the parties on January 30, 2008 and clearance was granted on February 14, 2008. The competition filing required in South Africa was made by the parties on February 12, 2008. The competition filing required in South Korea was made by the parties on January 14, 2008, and clearance was granted on January 17, 2008. In addition, although not a condition to the completion of the merger, the parties have made the competition filings required under the laws of Brazil on January 8, 2008 (and clearance was granted on February 27, 2008) and Mexico on February 8, 2008. Other than the filings described above, neither Trane nor Ingersoll Rand is aware of any other regulatory notifications that must be filed, approvals that must be obtained, or waiting periods that must be observed, in order to complete the merger. If the parties discover that other notifications, approvals or waiting periods are necessary, they will seek to observe or obtain them.

General. Subject to the terms and conditions of the merger agreement, Ingersoll Rand has agreed to (i) use its reasonable best efforts to obtain all regulatory clearances necessary to complete the merger, (ii) not to acquire any entity or enter into any other transaction if that acquisition or transaction would be reasonably likely to materially increase the risk of not obtaining, or materially delay the receipt of, the necessary regulatory approvals and clearances to complete the merger and (iii) commit and effect any sale, divestiture or disposition of any assets or businesses of Ingersoll Rand or Trane (after the closing of the merger) as may be required in order to avoid any injunction or order by a governmental entity that would prevent or materially delay the closing of the merger, except to the extent that such action would reasonably be likely to have a material adverse effect on Ingersoll Rand and Trane, on a combined basis.

 

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Merger Expenses, Fees and Costs

All expenses incurred in connection with the merger agreement and the related transactions will be paid by the party bearing those expenses, except that Ingersoll Rand and Trane have agreed to share equally the costs of filing, printing and mailing Ingersoll Rand’s registration statement on Form S-4 and this proxy statement/prospectus and the costs relating to filings under antitrust laws.

Accounting Treatment

The merger will be accounted for by Ingersoll Rand using the “purchase” method of accounting in accordance with Statement of Financial Accounting Standard No. 141, Business Combinations. Under the purchase method of accounting, the total purchase price paid by Ingersoll Rand, together with the direct costs of the merger, will be allocated, in accordance with generally accepted accounting principles, to the tangible and intangible assets acquired and liabilities assumed of Trane based on their estimated fair values, with any excess being treated as goodwill. The assets and liabilities of Trane will be consolidated into Ingersoll Rand’s balance sheet as of the closing date of the merger. The results of operations of Trane will be consolidated into the result of operations of Ingersoll Rand immediately following the closing of the merger.

Material United States Federal Income Tax Consequences

The following is a summary of the material U.S. federal income tax consequences of the merger to certain holders of Trane common stock. This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), regulations promulgated under the Code, administrative rulings by the Internal Revenue Service and court decisions now in effect. All of these authorities are subject to change, possibly with retroactive effect, so as to result in tax consequences different from those described below. This summary does not address all of the U.S. federal income tax consequences that might be applicable to a particular holder of Trane common stock. In addition, this summary does not address the U.S. federal income tax consequences of the merger to holders of Trane common stock who are subject to special treatment under U.S. federal income tax laws, including, for example, banks and other financial institutions, mutual funds, insurance companies, tax-exempt organizations, S corporations, corporations that accumulate earnings to avoid U.S. federal income tax, holders that are properly classified as “partnerships” under the Code, dealers in securities or foreign currencies, traders in securities who elect the mark-to-market method of accounting for their securities, holders who hold their Trane common stock as part of a hedge, straddle or conversion transaction, holders whose functional currency is not the U.S. dollar, certain expatriates, holders who acquired Trane common stock by gift or through the exercise of employee stock options or other compensatory arrangements, holders who are subject to the alternative minimum tax provisions of the Code and holders who do not hold their shares of Trane common stock as “capital assets” within the meaning of Section 1221 of the Code. This summary does not address the tax consequences of the merger under state, local or foreign tax laws.

This summary is provided for general information purposes only and is not intended as a substitute for tax advice. Each holder of Trane common stock should consult the holder’s tax advisors as to the particular tax consequences of the merger to such holder, including the application and effect of any state, local, foreign or other tax laws and the possible effect of changes to such laws.

Consequences to U.S. Holders

The following is a summary of material U.S. federal income tax consequences of the merger that will apply to you if you are a U.S. holder of Trane common stock.

“U.S. holder” means a beneficial owner of Trane common stock that is for U.S. federal income tax purposes:

 

   

an individual citizen or resident of the United States;

 

   

a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

 

 

 

a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

Exchange of Common Stock

Generally, the merger will be a taxable event for U.S. federal income tax purposes. A U.S. holder of Trane common stock receiving cash and Ingersoll Rand Class A common shares in the merger generally will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the sum of the amount of cash and the fair market value of Ingersoll Rand Class A common shares received and the holder’s adjusted tax basis in the Trane common stock surrendered. Any such gain or loss generally will be capital gain or loss. If a U.S. holder acquired shares of Trane common stock at different times, or if some of a holder’s shares of Trane common stock otherwise have a tax basis that differs from that of others, the holder will need to make separate basis and holding period calculations for each group of shares. Any capital gain or loss will be taxed as long-term capital gain or loss if the holder has held the Trane common stock for more than one year prior to the effective time of the merger. If the holder has held the Trane common stock for one year or less prior to the effective time of the merger, any capital gain or loss will be taxed as short-term capital gain or loss. Currently, long-term capital gain for non-corporate taxpayers is taxed at a maximum federal tax rate of 15%. The deductibility of capital losses is subject to certain limitations. A U.S. holder’s basis in any Ingersoll Rand Class A common shares received in the merger will equal the fair market value of the Ingersoll Rand Class A common shares received as determined on the date received and such holder’s holding period will begin on the day after such date.

Dissenting Stockholders

U.S. holders who exercise appraisal rights with respect to the merger, as discussed under “—Appraisal Rights” beginning on page 64, and who receive cash in respect of their shares of Trane common stock, generally will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount of cash received and the holder’s adjusted tax basis in the Trane common stock surrendered.

Information Reporting and Backup Withholding

Under the Code, a U.S. holder of Trane common stock may be subject, under certain circumstances, to information reporting on the cash received in the merger (or cash received pursuant to the exercise of appraisal rights) unless such holder is a corporation or other exempt recipient. Under the U.S. federal backup withholding tax rules, unless an exemption applies, the paying agent will withhold 28% of all reportable payments to which a holder of Trane common stock is entitled in connection with the merger unless the holder (i) provides a tax identification number (social security number in the case of an individual or employer identification number in the case of other holders), (ii) certifies that such number is correct and that no backup withholding is otherwise required and (iii) otherwise complies with such backup withholding rules.

Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited against a U.S. holder’s U.S. federal income tax liability, if any, provided that such holder furnishes the required information to the Internal Revenue Service in a timely manner.

Consequences to Non-U.S. Holders

The following is a summary of material U.S. federal income tax consequences of the merger that will apply to you if you are a non-U.S. holder of Trane common stock.

“Non-U.S. holder” means a beneficial owner of Trane common stock (other than a partnership) that is not a U.S. holder.

 

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Exchange of Common Stock

Any gain realized on the receipt of cash and Ingersoll Rand Class A common shares in the merger by a non-U.S. holder generally will not be subject to U.S. federal income tax unless:

 

   

the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment of the non-U.S. holder);

 

   

the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or

 

   

Trane is or has been a “United States real property holding corporation” for United States federal income tax purposes and the non-U.S. holder owned more than 5% of Trane’s common stock at any time during the five years preceding the merger.

An individual non-U.S. holder described in the first bullet point immediately above will be subject to tax on the net gain derived from the merger under regular graduated U.S. federal income tax rates. An individual non-U.S. holder described in the second bullet point immediately above will be subject to a flat 30% tax on the gain derived from the merger, which may be offset by U.S. source capital losses, even though the individual is not considered a resident of the United States. If a non-U.S. holder that is a foreign corporation falls under the first bullet point immediately above, it will be subject to tax on its net gain in the same manner as if it were a United States person as defined under the Code and, in addition, may be subject to the branch profits tax equal to 30% of its effectively connected earnings and profits or at such lower rate as may be specified by an applicable income tax treaty.

Trane believes it is not and has not been a “United States real property holding corporation” for U.S. federal income tax purposes.

Information Reporting and Backup Withholding

Information reporting and, depending on the circumstances, backup withholding (currently at a rate of 28%) will apply to the cash received in the merger, unless the beneficial owner certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person as defined under the Code) or such owner otherwise establishes an exemption. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited against a non-U.S. holder’s U.S. federal income tax liability, if any, provided that such non-U.S. holder furnishes the required information to the Internal Revenue Service in a timely manner.

The foregoing discussion does not address tax consequences that may vary with, or are contingent on, individual circumstances. Moreover, it only addresses U.S. federal income tax and does not address any foreign, state or local tax consequences. You should consult your own tax advisors concerning the U.S. federal income tax consequences of the merger and the ownership of Ingersoll Rand Class A common shares in light of your particular situation, as well as any consequences arising under the laws of any other taxing jurisdiction.

Appraisal Rights

In connection with the merger, record holders of Trane common stock who comply with the procedures summarized below will be entitled to appraisal rights if the merger is completed. Under Section 262 of the General Corporation Law of the State of Delaware (which we refer to as Section 262), as a result of completion of the merger, holders of shares of Trane common stock with respect to which appraisal rights are properly demanded and perfected and not withdrawn or lost are entitled, in lieu of receiving the merger consideration, to have the “fair value” of their shares at the effective time of the merger (exclusive of any element of value arising

 

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from the accomplishment or expectation of the merger) judicially determined and paid to them in cash by complying with the provisions of Section 262. Trane is required to send a notice to that effect to each shareholder not less than 20 days prior to the special meeting. This proxy statement/prospectus constitutes that notice to you.

The following is a brief summary of Section 262, which sets forth the procedures for demanding statutory appraisal rights. This summary is qualified in its entirety by reference to Section 262, a copy of the text of which is attached to this proxy statement/prospectus as Annex C.

Shareholders of record who desire to exercise their appraisal rights must satisfy all of the following conditions.

A shareholder who desires to exercise appraisal rights must (a) not vote in favor of the merger and (b) deliver a written demand for appraisal of the shareholder’s shares to the Secretary of Trane before the vote on the merger at the special meeting.

A demand for appraisal must be executed by or for the shareholder of record, fully and correctly, as the shareholder's name appears on the certificates representing shares. If shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, such demand must be executed by the fiduciary. If shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand must be executed by all joint owners. An authorized agent, including an agent of two or more joint owners, may execute the demand for appraisal for a shareholder of record; however, the agent must identify the record owner and expressly disclose that, in exercising the demand, the agent is acting as agent for the record owner. In addition, the shareholder must continuously hold the shares of record from the date of making the demand through the effective time of the merger.

A record owner, such as a broker, who holds shares as a nominee for others may exercise appraisal rights with respect to the shares held for all or less than all beneficial owners of shares as to which the holder is the record owner. In that case, the written demand must set forth the number of shares covered by the demand. Where the number of shares is not expressly stated, the demand will be presumed to cover all shares outstanding in the name of the record owner.

Beneficial owners who are not record owners and who intend to exercise appraisal rights should instruct the record owner to comply strictly with the statutory requirements with respect to the exercise of appraisal rights before the vote on the adoption of the merger agreement at the special meeting. A holder of shares held in “street name” who desires appraisal rights with respect to those shares must take such actions as may be necessary to ensure that a timely and proper demand for appraisal is made by the record owner of the shares. Shares held through brokerage firms, banks and other financial institutions are frequently deposited with and held of record in the name of a nominee of a central security depositary, such as Cede & Co., The Depository Trust Company’s nominee. Any holder of shares desiring appraisal rights with respect to such shares who held such shares through a brokerage firm, bank or other financial institution is responsible for ensuring that the demand for appraisal is made by the record holder. The shareholder should instruct such firm, bank or institution that the demand for appraisal must be made by the record holder of the shares, which might be the nominee of a central security depositary if the shares have been so deposited.

As required by Section 262, a demand for appraisal must be in writing and must reasonably inform Trane of the identity of the record holder (which might be a nominee as described above) and of such holder's intention to seek appraisal of such shares.

Shareholders of record who elect to demand appraisal of their shares must mail or deliver their written demand to: Trane Inc., One Centennial Avenue, Piscataway, New Jersey 08855-6820, Attention: Secretary. The written demand for appraisal should specify the shareholder’s name and mailing address, the number of shares owned, and that the shareholder is demanding appraisal of his or her shares. The written demand must be

 

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received by Trane prior to the special meeting. Neither voting (in person or by proxy) against, abstaining from voting on or failing to vote on the proposal to adopt the merger agreement will alone suffice to constitute a written demand for appraisal within the meaning of Section 262. In addition, the shareholder must not vote its shares of common stock in favor of adoption of the merger agreement. Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of adoption of the merger agreement, a shareholder who votes by proxy and who wishes to exercise appraisal rights must vote against the merger agreement or abstain from voting on the merger agreement.

Within 120 days after the effective time of the merger, either the surviving corporation in the merger or any shareholder who has timely and properly demanded appraisal of such shareholder’s shares and who has complied with the requirements of Section 262 and is otherwise entitled to appraisal rights may file a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares of all shareholders who have properly demanded appraisal. If a petition for an appraisal is timely filed, after a hearing on such petition, the Delaware Court of Chancery will determine which shareholders are entitled to appraisal rights and thereafter will appraise the shares owned by those shareholders, determining the fair value of the shares exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest to be paid, if any, upon the amount determined to be the fair value. In determining fair value, the Delaware Court of Chancery is to take into account all relevant factors. In Weinberger v. UOP, Inc., et al., the Delaware Supreme Court discussed the considerations that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that in making this determination of fair value the court must consider “market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts which were known or which could be ascertained as of the date of merger which throw any light on future prospects of the merged corporation.” The Delaware Supreme Court construed Section 262 to mean that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.” However, the Delaware Supreme Court noted that Section 262 provides that fair value is to be determined “exclusive of any element of value arising from the accomplishment or expectation of the merger.”

Shareholders considering seeking appraisal should bear in mind that the fair value of their shares determined under Section 262 could be more than, the same as, or less than the merger consideration they are entitled to receive pursuant to the merger agreement if they do not seek appraisal of their shares, and that opinions of investment banking firms as to fairness from a financial point of view are not necessarily opinions as to fair value under Section 262.

The cost of the appraisal proceeding may be determined by the Delaware Court of Chancery and charged upon the parties as the Delaware Court of Chancery deems equitable in the circumstances. Upon application of a shareholder seeking appraisal rights, the Delaware Court of Chancery may order that all or a portion of the expenses incurred by such shareholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all shares entitled to appraisal. In the absence of such a determination of assessment, each party bears its own expenses.

Except as explained in the last sentence of this paragraph, at any time within 60 days after the effective time of the merger, any shareholder who has demanded appraisal shall have the right to withdraw such shareholder’s demand for appraisal and to accept the cash and Ingersoll Rand Class A common shares to which the shareholder is entitled pursuant to the merger. After this period, the shareholder may withdraw such shareholder’s demand for appraisal only with the consent of the surviving corporation in the merger. If no petition for appraisal is filed with the Delaware Court of Chancery within 120 days after the effective time of the merger, shareholders’ rights to appraisal shall cease and all shareholders shall be entitled only to receive the cash and Ingersoll Rand Class A common shares as provided for in the merger agreement. Inasmuch as the parties to the merger agreement have

 

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no obligation to file such a petition, and have no present intention to do so, any shareholder who desires that such petition be filed is advised to file it on a timely basis. No petition timely filed in the Delaware Court of Chancery demanding appraisal shall be dismissed as to any shareholders without the approval of the Delaware Court of Chancery, and that approval may be conditioned upon such terms as the Delaware Court of Chancery deems just.

The foregoing is a brief summary of Section 262 that sets forth the procedures for demanding statutory appraisal rights. This summary is qualified in its entirety by reference to Section 262, a copy of the text of which is attached hereto as Annex C. Failure to comply with all the procedures set forth in Section 262 will result in the loss of a shareholder’s statutory appraisal rights.

Restrictions on Sales of Shares by Certain Affiliates

The Ingersoll Rand Class A common shares to be issued in connection with the merger will be registered under the Securities Act of 1933, as amended, which we refer to in this proxy statement/prospectus as the Securities Act, and will be freely transferable under the Securities Act, except for Ingersoll Rand Class A common shares issued to any person who is deemed to be an “affiliate” of Ingersoll Rand for purposes of Rule 144 under the Securities Act. Persons who may be deemed to be affiliates include individuals or entities that control, are controlled by, or are under the common control with Ingersoll Rand and may include the executive officers, directors and significant shareholders of Ingersoll Rand. Former Trane shareholders who were affiliates of Trane at the time of the Trane special meeting and who do not become affiliates of Ingersoll Rand after the completion of the merger, may sell their Ingersoll Rand Class A common shares received in the merger at any time without regard to the volume and manner of sale limitations of Rule 144 under the Securities Act. Former Trane shareholders who become affiliates of Ingersoll Rand after completion of the merger will be subject to the volume and manner of sale limitations of Rule 144 under the Securities Act, until each such shareholder is no longer an affiliate of Ingersoll Rand.

This proxy statement/prospectus does not cover resales of Ingersoll Rand Class A common shares received by any affiliate of Ingersoll Rand upon completion of the merger, and no such affiliate is authorized to make any use of this proxy statement/prospectus in connection with any resale.

Stock Exchange Listing

Ingersoll Rand has agreed to use its reasonable best efforts to cause the Ingersoll Rand Class A common shares to be issued pursuant to the merger to be approved for listing on the NYSE. It is a condition to the completion of the merger that such shares be approved for listing on the NYSE, subject to official notice of issuance. Following the merger, the Ingersoll Rand Class A common shares will continue to trade on the NYSE under the symbol “IR.”

Delisting and Deregistration of Trane Common Stock

If the merger is completed, Trane common stock will be delisted from the NYSE and will no longer be registered under the Securities Exchange Act of 1934, as amended.

 

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THE MERGER AGREEMENT

The following is a summary of the material provisions of the merger agreement. This summary is qualified in its entirety by reference to the merger agreement, which is incorporated herein by reference in its entirety and attached to this proxy statement/prospectus as Annex A. We encourage you to read the merger agreement in its entirety because it is the legal document that governs the merger. This summary is not intended to provide you with any other factual information about Trane or Ingersoll Rand. Such information can be found elsewhere in this proxy statement/prospectus and in Trane’s and Ingersoll Rand’s public filings with the SEC, as described in the section entitled “Where You Can Find More Information” beginning on page 124.

Form of the Merger

If the holders of Trane common stock adopt the merger agreement and all other conditions to the merger are satisfied or waived, Indian Merger Sub, Inc. (a newly formed and wholly-owned subsidiary of Ingersoll Rand established to facilitate the acquisition of Trane) will be merged with and into Trane. Trane will survive the merger as a wholly-owned subsidiary of Ingersoll Rand and will continue its corporate existence under Delaware law under the name “Trane Inc.”

Closing

Unless the parties agree otherwise, the closing will occur on a date to be specified by the parties (which will be no later than the second business day after the satisfaction or waiver of all closing conditions).

Effective Time

The merger will become effective at the time at which a certificate of merger has been duly filed with the Secretary of State of the State of Delaware or such later time as is agreed upon by the parties and specified in the certificate of merger.

Merger Consideration

At the effective time of the merger, each share of Trane common stock will be exchanged for (i) 0.23 of an Ingersoll Rand Class A common share and (ii) $36.50 in cash, without interest. Ingersoll Rand will increase, by up to $1.00 per share, the amount of cash to be included in the merger consideration and decrease the fraction of an Ingersoll Rand Class A common share by an amount having an equivalent value (based on the Ingersoll Rand Reference Price) as the amount of the increase in cash, if Ingersoll Rand or Trane reasonably determines that those actions are necessary in order to list on the NYSE the Ingersoll Rand Class A common shares to be issued in the merger without the requirement of a vote of Ingersoll Rand shareholders. Such a vote would be triggered if the number of Ingersoll Rand Class A common shares or securities convertible or exercisable for Ingersoll Rand Class A common shares to be issued in the merger would equal or exceed 20% of the Ingersoll Rand Class A common shares outstanding immediately prior to the completion of the merger. A vote by Trane shareholders for the adoption of the merger agreement constitutes approval of the merger whether or not Ingersoll Rand substitutes up to $1.00 per share in cash for a portion of the stock consideration having an equivalent value as described in this paragraph.

Trane shareholders will not receive any fractional Ingersoll Rand Class A common shares pursuant to the merger. Instead of any fractional shares, shareholders will be paid an amount in cash for such fraction calculated by multiplying (i) the fractional share interest to which the holder of Trane common stock (after taking into account all shares of Trane’s common stock formerly represented by all certificates surrendered by such holder) would otherwise be entitled by (ii) the per share closing price of an Ingersoll Rand Class A common share on the last trading day immediately prior to the closing date of the merger, as that price is reported on the NYSE Composite Transaction Tape (as reported by Bloomberg Financial Markets or such other source as the parties shall agree in writing prior to the effective time).

 

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Treatment of Stock Options

Accelerated Vesting. As of the effective time of the merger, each outstanding Trane stock option to acquire shares of Trane common stock will, whether or not exercisable or vested at the effective time, become fully vested and exercisable.

Option Election. Except with respect to Trane stock options (i) held by the specified option holders (as described below under “—Specified Option Holders Side Letter”), (ii) that are ISOs (as described below under “—ISOs”), or (iii) held by individuals issued under a tax-qualified sub-plan under the laws of France, the holders of all other Trane stock options issued under Trane’s Stock Incentive Plan or Trane’s 2002 Omnibus Incentive Plan are entitled to specify and elect (by following the election procedure described below) their desire with respect to how the Trane stock options held by such individuals will be treated in the merger and, in particular, holders of such Trane stock options are entitled to elect and specify:

 

   

that such holder desires to have all or a portion (determined on a grant-by-grant basis) of the shares of Trane common stock subject to such Trane stock option converted at the effective time into the right to receive a payment in cash (the “Cash-Out Amount”) equal to:

 

   

the excess, if any, of:

 

   

(1) $36.50, which is the cash consideration in the merger (as may be adjusted pursuant to the terms of the merger agreement), plus (2) the product of 0.23 (which is the exchange ratio in the merger (as may be adjusted pursuant to the terms of the merger agreement)) and the Ingersoll Rand Reference Price; over

 

   

the exercise price per share of Trane common stock subject to such Trane stock option; or

 

   

that such holder desires to have all or a portion (determined on a grant-by-grant basis) of the shares of Trane common stock subject to such Trane stock option converted at the effective time into options to purchase Ingersoll Rand Class A common shares under the same terms and conditions as are in effect immediately prior to the effective time with respect to such Trane stock option, except that:

 

   

each such Trane stock option will be exercisable for, and represent the right to acquire, that whole number of Ingersoll Rand Class A common shares (rounded down to the nearest whole share) equal to the number of shares of Trane common stock subject to such Trane stock option multiplied by 0.96; and

 

   

the exercise price per Ingersoll Rand common share under each such Trane stock option will be an amount (rounded up to the nearest full cent) equal to (A) the exercise price per share of Trane common stock subject to the related Trane stock option, as in effect immediately prior to the effective time, divided by (B) 0.96; provided, however, to the extent that the application of this exercise price adjustment formula results in a the Ingersoll Rand stock option received in exchange for the Trane stock option having an option spread (the difference between the aggregate exercise price of the converted option and the aggregate fair market value of the Ingersoll Rand Class A common shares subject to such converted option, based on the closing price of Ingersoll Rand Class A common shares on the closing date) which is greater than or lesser than the option spread of the related Trane stock option (based on the closing price of Trane common stock on the date immediately prior to the closing date), the exercise price per Ingersoll Rand Class A common shares subject to such converted option will be adjusted up or down, as the case may be, so that the option spread of the converted option is equal the option spread in the related Trane stock option.

Invalid Election or No Option Election. In the event that a holder of Trane stock options fails to make a valid election with respect to the treatment of his or her Trane stock options pursuant to election procedures described below, the Trane stock options held by such individual will be treated in the merger as follows:

 

   

Trane stock options issued under Trane’s Stock Incentive Plan will be converted into (“rolled-over”) options to purchase Ingersoll Rand Class A common shares as described above; and

 

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Trane stock options issued under Trane’s 2002 Omnibus Incentive Plan will be converted into (“cashed-out”) the right to receive the Cash-Out Amount as described above.

France Options. Individuals that hold Trane stock options that are issued under a tax-qualified sub-plan under the laws of France will not be entitled to make the option election described above, but rather, such Trane stock options will be converted automatically in the merger, without any further action required by such holder, into options to purchase Ingersoll Rand Class A common shares as described above.

ISOs. Notwithstanding anything to the contrary contained above, any Trane stock options as to which Section 421 of the Code applies as of the effective time by reason of the qualification of such Trane stock option under Section 422 of the Code (such options are referred to herein as “ISOs”) will be treated in the manner provided in this paragraph. All ISOs will be automatically converted into options to acquire shares of Ingersoll Rand upon the same terms and conditions in effect immediately prior to the effective time with respect to such ISOs, except that:

 

   

each ISO will be exercisable for that whole number of Ingersoll Rand Class A common shares (rounded down to the nearest whole share) equal to the number of shares of Trane common stock subject to such ISO multiplied by the quotient of (i) the volume weighted averages of the trading prices of Trane common stock for each of the ten consecutive full trading days ending on the third trading day prior to closing) divided by (ii) the Ingersoll Rand Reference Price (the quotient of (i) divided by (ii) being the “ISO Exchange Ratio”); and

 

   

the exercise price per Ingersoll Rand common share under each such ISO will be an amount (rounded up to the nearest full cent) equal to (A) the exercise price per share of Trane common stock subject to the related ISO, as in effect immediately prior to the effective time, divided by (B) the ISO Exchange Ratio (as described above).

Option Election. An option election package is being mailed to holders of Trane stock options together with this proxy statement/prospectus. Any election will have been properly made only if an election form is properly completed or submitted, as applicable, by 5:00 p.m. eastern time on             , 2008, the option calculation date, according to the instructions provided in the option election package. Any option election may be revoked or modified by the person making such election, only by properly making a revised option election prior to 5:00 p.m. eastern time on the option calculation date, according to the instructions provided in the option election package. In the event (A) an option election is properly revoked prior to 5:00 p.m. eastern time on the option calculation date and a subsequently properly completed option election is not made prior to 5:00 p.m. eastern time on the option calculation date, or (B) the holder of such Trane stock option has not made an effective option election on or before 5:00 p.m. eastern time on the option calculation date with respect to any specified Trane stock option, then, in each case, the holder of such Trane stock options with respect to which no valid election has been made in accordance with the procedures described in the option election package will be deemed to have made neither a “cash-out election” nor a “roll-over election” in respect of such Trane stock options held by such holder and the Trane stock options held by such individual for which a valid election was not made will be treated in the manner described above under “—Invalid Election or No Option Election.” For more information on the option election, please see the section of this proxy statement/prospectus entitled “The Stock Option Election” beginning on page 90.

Specified Option Holders Side Letter. Concurrently with the signing of the merger agreement, Frederic M. Poses, G. Peter D’Aloia, Mary Elizabeth Gustafsson, Lawrence B. Costello, W. Craig Kissel and David R. Pannier (collectively referred to in this proxy statement/prospectus, as the “specified option holders”) executed a side letter with Trane in which they have agreed to (i) make a “roll-over election” with respect to all Trane stock options (other than ISOs) held by such individual, (ii) not to exercise any Trane stock options between the date of signing the merger agreement and the closing of the merger (other than as required by a Rule 10b5-1 plan in effect as of December 15, 2007) and (iii) be subject to the pro-ration procedures described below. As of February 25, 2008, the specified option holders hold, in the aggregate, 7,764,217 Trane stock options (including 53,347 ISOs).

 

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Specified Holders Proration. Under the merger agreement, Trane and Ingersoll Rand have agreed that the maximum number of Trane stock options that may be converted in the merger into Ingersoll Rand stock options (being referred to herein as the “maximum rollover number”) will be (A) 8,200,000 Trane stock options minus (B) the number of shares of Trane common stock issued between December 15, 2007 and the closing of the merger (other than shares of Trane common stock issued upon the exercise of Trane stock options or Trane stock-based awards) multiplied by the exchange ratio of 0.23 (as may be adjusted pursuant to the terms of the merger agreement). As a result, the specified option holders have agreed, pursuant to the side letter executed by each specified option holder, to be subject to pro-ration provisions under the merger agreement to ensure that no more than the maximum rollover number of Trane stock options are converted into Ingersoll Rand stock options after giving effect to the elections made by all other holders of Trane stock options as described below. Prior to making any adjustments pursuant to the specified option holders pro-ration provisions under the merger agreement, the following Trane stock options will be converted into Ingersoll Rand stock options as described above: (1) ISOs, (2) all Trane stock options held by individuals issued under a tax-qualified sub-plan under the laws of France, (3) all Trane stock options (other than those held by the specified option holders) with respect to which a valid “roll-over election” has been made pursuant to the election procedures described above, and (4) the Trane stock options issued under Trane’s Stock Incentive Plan with respect to which neither a valid “roll-over election” nor a valid “cash-out election” has been made pursuant to the election procedures described above (the sum of (1) through (4), being the “automatic rollover options”). If the sum of the automatic rollover options plus the number of Trane stock options held by the specified option holders does not exceed the maximum rollover number, then all of the Trane stock options held by the specified option holders will be converted into Ingersoll Rand stock options as described above. However, if the sum of the automatic rollover options plus the Trane stock options held by the specified option holders exceeds the maximum rollover number, the Trane stock options held by the specified option holders will be subject to the pro-ration provisions of the merger agreement in which:

 

   

a cash-out proration factor will be established and will be equal to a fraction, the numerator of which is (i) the sum of (x) the automatic rollover options plus (y) the number of Trane stock options held by the specified options holders, minus (ii) the maximum rollover number, and the denominator of which is the number of Trane stock options held by the specified option holders;

 

   

then, with respect to each specified option holder, a number of Trane stock options equal to the cash-out proration factor described above multiplied by the number of Trane stock options held by each such specified option holder will be converted into the right to receive the Cash-Out Amount described above (and the Trane stock options held by the specified option holder that are converted into the Cash-Out Amount will be selected pro rata among the specified option holders based on the relative number of Trane stock options held by such holders, with the Trane stock options of each specified option holder having the earliest grant date being cashed-out first); and

 

   

the remaining Trane stock options held by the specified option holders will be converted into Ingersoll Rand stock options in accordance with provisions described above.

Trane Restricted Stock Units. Immediately prior to the effective time, except as separately agreed by Ingersoll Rand and the holder thereof (which agreement shall then govern such award), each award of Trane restricted stock units and any accrued dividends shall vest in full and be converted into the right to receive the merger consideration. The surviving corporation in the merger will vest and pay all dividends accrued on such Trane restricted stock units to the holders thereof within five business days after the effective time.

Representations and Warranties

The merger agreement contains representations and warranties made by and to the parties thereto as of specific dates. The assertions embodied in those representations and warranties were made for purposes of the merger agreement and are subject to qualifications and limitations agreed to by the respective parties in connection with negotiating the terms of the merger agreement. In addition, certain representations and warranties were made as of a specified date, may be subject to a contractual standard of materiality different

 

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from what might be viewed as material to shareholders, or may have been used for the purpose of allocating risk between the respective parties rather than establishing matters as facts. For the foregoing reasons, you should not rely on the representations and warranties as statements of factual information.

The merger agreement contains representations and warranties by Trane, subject in some cases to specified exceptions and qualifications, relating to a number of matters, including the following:

 

   

the organization, valid existence, good standing and qualification to do business of Trane and its significant subsidiaries;

 

   

Trane’s ownership of its subsidiaries;

 

   

the capitalization and indebtedness of Trane and its subsidiaries, including the number of shares of Trane common stock, stock options and other equity-based awards outstanding;

 

   

corporate authorization and validity of the merger agreement and the amendment to Trane’s shareholder rights agreement;

 

   

the unanimous approval by Trane’s board of directors of the merger agreement;

 

   

the absence of any conflicts with Trane’s organization documents, applicable laws, governmental orders or certain agreements as a result of entering into the merger agreement and completing the merger;

 

   

the required consents and filings with governmental entities in connection with the transactions contemplated by the merger agreement;

 

   

the proper filing of documents with the SEC since January 1, 2006 and the accuracy of information contained in those documents;

 

   

the conformity with generally accepted accounting principles of Trane’s financial statements filed with the SEC since January 1, 2006 and the absence of certain undisclosed liabilities;

 

   

the accuracy of information supplied by Trane in connection with this proxy statement/prospectus and the registration statement of which it is a part;

 

   

the absence of a Trane material adverse effect (as described below) since September 30, 2007;

 

   

the absence of certain litigation, investigations and injunctions;

 

   

the compliance with certain material contracts;

 

   

the compliance with applicable laws;

 

   

employment and labor matters affecting Trane, including matters relating to Trane employee benefit plans;

 

   

tax matters, including matters relating to the spin-off of WABCO Holdings, Inc.;

 

   

real property and intellectual property;

 

   

the required vote by Trane shareholders to complete the merger;

 

   

the inapplicability of takeover statutes to the merger agreement, the merger or the transactions contemplated by the merger agreement;

 

   

broker’s and financial advisor’s fees related to the merger;

 

   

the receipt of the opinion from Lazard Frères & Co. LLC, dated December 15, 2007, as to the fairness of the merger consideration to the Trane shareholders from a financial point of view; and

 

   

insurance matters.

 

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The merger agreement contains representations and warranties by Ingersoll Rand and Indian Merger Sub, Inc., subject in some cases to specified exceptions and qualifications, relating to a number of matters, including the following:

 

   

the organization, valid existence, good standing and qualification to do business of Ingersoll Rand, Indian Merger Sub and Ingersoll Rand’s significant subsidiaries;

 

   

Ingersoll Rand’s ownership of its significant subsidiaries;

 

   

the capitalization and indebtedness of Ingersoll Rand and its subsidiaries, including the number of Ingersoll Rand common shares, stock options and other equity-based awards outstanding;

 

   

corporate authorization and validity of the merger agreement;

 

   

the absence of any conflicts with Ingersoll Rand’s or Indian Merger Sub’s organization documents, applicable laws, governmental orders or certain agreements as a result of entering into the merger agreement and completing the merger;

 

   

the required consents and filings with governmental entities in connection with the transactions contemplated by the merger agreement;

 

   

the proper filing of documents with the SEC since January 1, 2006 and the accuracy of information contained in those documents;

 

   

the conformity with generally accepted accounting principles of Ingersoll Rand’s financial statements filed with the SEC since January 1, 2006 and the absence of certain undisclosed liabilities;

 

   

the accuracy of information supplied by Ingersoll Rand in connection with this proxy statement/prospectus and the registration statement of which it is a part;

 

   

the purpose of the formation and prior activities of Indian Merger Sub;

 

   

broker’s and financial advisor’s fees related to the merger;

 

   

the absence of an Ingersoll Rand material adverse effect (as described below) since September 30, 2007;

 

   

the absence of certain litigation, investigations and injunctions;

 

   

the compliance with applicable laws;

 

   

the validity of the financing commitment letters and the sufficiency of the funds to be provided under the commitment letters;

 

   

confirmation that Ingersoll Rand has not been and is not an “interested stockholder” for purposes of the DGCL or other applicable state takeover statutes;

 

   

the absence of any direct or indirect beneficial ownership of Trane common stock;

 

   

no vote of Ingersoll Rand’s shareholders required to adopt the merger agreement; and

 

   

tax matters.

Certain of the representations and warranties made by the parties are qualified as to “materiality” or “material adverse effect.” For purposes of the merger agreement, “material adverse effect,” when used in reference to Trane or Ingersoll Rand, means any change, effect, event, occurrence, state of facts or development which, individually or in the aggregate:

 

   

has or would reasonably be expected to have a material adverse effect on the business, assets, financial condition, liabilities or results of operations of the referenced company and its subsidiaries, taken as a whole; or

 

   

is or would reasonably be expected to impair in any material respect the ability of the referenced company to consummate the merger and the other transactions contemplated by the merger agreement or to perform its obligations under the merger agreement on a timely basis.

 

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However, any change, effect, event, occurrence, state of facts or development will not be taken into account in determining whether there has been or will be a material adverse effect if they relate to:

 

   

the financial or securities markets or the economy in general;

 

   

the industries in which Trane, Ingersoll Rand or any of their subsidiaries operates in general, to the extent that such change, effect, event, occurrence, state of facts or development does not disproportionately impact Trane, Ingersoll Rand or any of their subsidiaries;

 

   

changes in generally accepted accounting principles or in accounting standards;

 

   

the execution, announcement or performance of the merger agreement or the consummation of the transactions contemplated by the merger agreement (which includes, in respect of a “material adverse effect” on Trane, by reason of the identity of Ingersoll Rand or any communication by Ingersoll Rand regarding the plans or intentions of Ingersoll Rand with respect to the conduct of the business of Trane and including the impact thereof on relationships with customers, suppliers, distributors, partners or employees), or any litigation arising relating to the merger agreement or the transactions contemplated by the merger agreement; provided, that this exception shall not affect (i) certain tax representations of Trane relating to the spin-off of WABCO Holdings, Inc. or (ii) certain representations of Trane and Ingersoll Rand with respect to non-contravention or governmental approvals;

 

   

any action taken by Trane or Ingersoll Rand as contemplated or permitted by the merger agreement or with the other party's consent;

 

   

any failure to meet any internal or public projections, forecasts or estimates of revenue or earnings (except that the underlying cause of any such failure may be taken into account in determining whether a “material adverse effect” has occurred); or

 

   

in respect of a “material adverse effect” on Trane, (i) any fines that may be imposed by the European Commission or other limitations associated with certain antitrust matters relating to the Bath and Kitchen business that was sold by Trane in October 2007 (as described in Trane's historical SEC filings), (ii) any asbestos liabilities to the extent reserved for on Trane's balance sheet as of September 30, 2007, (iii) any post-closing purchase price adjustments under the stock and asset purchase agreement between Trane and affiliates of Bain Capital Partners LLC relating to the sale of Trane's Bath and Kitchen business and (iv) any indemnification obligations of Trane in connection with (A) the various agreements entered into between Trane and WABCO Holdings Inc. on July 16, 2007 in relation to the spin-off of WABCO Holdings Inc. that was completed on July 31, 2007 and (B) the stock and asset purchase agreement entered into between Trane and affiliates of Bain Capital Partners, LLC on July 23, 2007 and amended on October 30, 2007 in relation to the sale of the Bath and Kitchen business that was completed on October 31, 2007.

The representations and warranties of each of the parties to the merger agreement will expire upon the effective time of the merger.

Covenants and Agreements

Conduct of Business by Trane. Trane has agreed that, prior to the completion of the merger, unless Ingersoll Rand gives its prior written consent (which consent may not be unreasonably withheld, delayed or conditioned) or as required by applicable law or as otherwise expressly permitted or required by the merger agreement, it shall and shall cause its subsidiaries to:

 

   

carry on its business in all material respects in the ordinary course consistent with past practice; and

 

   

use commercially reasonable efforts to preserve substantially intact its current business organizations, keep available the services of its current officers, employees and consultants and preserve its relationships with customers, suppliers, licensors, licensees, distributors and others having business dealings with it.

 

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Trane has also agreed that, prior to the completion of the merger, unless Ingersoll Rand gives its prior written consent (which consent will not be unreasonably withheld, delayed or conditioned), or as required by applicable law or as otherwise expressly permitted or required by the merger agreement, it shall not and shall not permit any of its subsidiaries to:

 

   

declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property) in respect of, any of its capital stock, other than quarterly cash dividends not in excess of $0.16 per share, with record and payment dates materially consistent with past practice and dividends or distributions by a wholly-owned subsidiary to its stockholders;

 

   

split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of, or in substitution for, shares of its capital stock;

 

   

purchase, redeem or otherwise acquire any shares of its capital stock or any other securities or any rights, warrants or options to acquire any such shares or other securities, except as required by the terms of Trane’s Stock Incentive Plan, 2002 Omnibus Incentive Plan, or any plans, arrangements or contracts existing as of December 15, 2007 between Trane and any director or employee of Trane;

 

   

issue, sell, grant, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into or exercisable for, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities, or any “phantom” stock, “phantom” stock rights, stock appreciation rights or stock based performance units, other than the issuance of shares of common stock upon the exercise of Trane stock options or Trane stock based awards, in each case outstanding as of December 15, 2007 and in accordance with their terms on December 15, 2007;

 

   

amend the organizational documents of Trane or its subsidiaries, except to the extent such changes are required in order to change the name of any of Trane’s subsidiaries pursuant to the terms of any contract existing as of December 15, 2007;

 

   

directly or indirectly acquire any assets, rights or properties, or any person or division, business or equity interest of any person by merger, consolidation, asset purchase, investment, or capital contribution, or any other manner, except for (i) capital expenditures consistent in all material respects with scheduled capital expenditure amounts, (ii) purchases of inventory, raw materials or supplies, and other assets in the ordinary course of business consistent with past practice and (iii) other acquisitions, investments or capital contributions not exceeding $25 million in the aggregate;

 

   

sell, dispose of, abandon, lease, license, or otherwise encumber any material properties, rights or assets, except (i) sales, dispositions, leases, licenses or encumbrances required pursuant to contracts existing as of December 15, 2007, and (ii) sales, dispositions, leases, licenses or encumbrances of (A) assets or properties having a value not to exceed in the aggregate $25 million, or (B) inventory or finished goods or other assets in the ordinary course of business consistent with past practice;

 

   

redeem, repurchase, prepay (other than prepayments of revolving loans under Trane’s existing credit facilities), defease, cancel, incur or otherwise acquire, or modify in any material respect the terms of, any indebtedness for borrowed money or assume, guarantee or endorse, or otherwise become responsible for, any such indebtedness of another person, issue or sell any debt securities or calls, options, warrants or other rights to acquire any debt securities, enter into any “keep well” or other contract to maintain any financial statement condition of another person (other than borrowings (including issuances of letters of credit) under existing loan facilities in the ordinary course of business consistent with past practice, in an aggregate amount such that the aggregate amount of borrowings thereunder do not exceed $50 million at any time outstanding);

 

   

make any loans or advances to any person, other than to a wholly-owned subsidiary, which would result in the aggregate principal amount of all loans and advances exceeding $25 million at any time outstanding;

 

   

make any new capital expenditures in excess of specified amounts;

 

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pay, discharge, settle or satisfy any claims, liabilities, obligations or litigation that is material to Trane and its subsidiaries taken as a whole, except (i) as required by law or court judgment, (ii) to the extent reserved for in Trane’s financial statements filed with the SEC prior to December 15, 2007 or incurred since the date of such financial statements in the ordinary course of business consistent with past practice, or (iii) discharges in the ordinary course of business consistent with past practice;

 

   

waive or assign any claims or rights material to Trane and its subsidiaries taken as a whole, except as required by law or court judgment;

 

   

with respect to tax matters, (i) make or change any material tax election, (ii) change an annual accounting period, (iii) adopt or change any material accounting method with respect to taxes, (iv) file any material amended tax return, (v) enter into any material closing agreement, (vi) settle or compromise any proceeding with respect to any material tax claim or assessment, (vii) surrender any right to claim a refund of material taxes, or (viii) consent to any extension or waiver of the limitation period applicable to any material tax claim or assessment;

 

   

except in the ordinary course of business consistent with past practice, enter into, modify, amend or terminate any material contract or waive, release or assign any material rights or claims thereunder, which if so entered into, modified, amended, terminated, waived, cancelled, failed to renew, released or assigned, in each case as applicable, would reasonably be expected to impair in any material respect Trane’s ability to conduct its business as currently conducted;

 

   

except (i) as required or permitted by the merger agreement, (ii) as required by applicable law, (iii) as required to comply with any Trane benefit plan, agreement or other contract entered into prior to December 15, 2007, or (iv) as required or advisable to avoid adverse treatment under Section 409A of the Internal Revenue Code:

 

   

adopt, enter into, terminate or amend (i) any benefit plan or (ii) any benefit agreement or other contract, plan or policy involving Trane and its employees, except in the ordinary course of business consistent with past practice with respect to employees with base salary of $175,000 or less;

 

   

grant any severance or termination pay or retention pay in excess of, with respect to retention, the amounts contemplated by Trane’s retention plan described under the section entitled “The Merger—Interests of Certain Persons in the Merger—Officers’ Severance Plan” or, with respect to enhanced severance, as agreed between Trane and Ingersoll Rand, or increase the compensation or fringe benefits of any employee other than increases in the ordinary course of business, consistent with past practice;

 

   

loan or advance any money or other property to any current or former employee, director or consultant;

 

   

establish, adopt, enter into, amend or terminate any plan, agreement, program, policy, trust, fund or other arrangement that would be a “Company Benefit Plan,” as defined in the merger agreement, if it were existing as of December 15, 2007;

 

   

allow for the commencement of any new offering periods under any employee stock purchase plans following January 2, 2008;

 

   

remove any existing restrictions in any benefit plans or agreements or awards made thereunder;

 

   

take any action to fund or in any other way secure the payment of compensation or benefits under any benefit plan or employment, severance or similar agreement;

 

   

accelerate the vesting or payment of any compensation or benefit under any benefit plan or agreement or awards made thereunder;

 

   

materially change any actuarial or other assumption used to calculate funding obligations with respect to any pension plan or change the manner in which contributions to any pension plan are made or the basis on which such contributions are determined;

 

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notwithstanding any of the foregoing, Trane is permitted to make payments with respect to amounts of awards under Trane’s annual or long-term incentive plans made prior to fiscal year 2008, provided that such awards are made in the ordinary course of business consistent with past practice, and Trane may grant awards in respect of fiscal year 2008; provided, however, in no event will any bonus in respect of service performed or accrued in 2008 be paid or payable, except to the extent required to be paid or payable to an employee under applicable law, or as required by the terms of a benefit plan or agreement, as such plan or agreement was in effect on December 15, 2007; provided, further, payment or grant of such awards shall not include equity or equity-based awards;

 

   

enter into, modify, amend or terminate any collective bargaining agreement with any labor union, other than in the ordinary course of business consistent with past practice;

 

   

revalue any material assets or liabilities or make any change in accounting methods, principles or practices, except as required by generally accepted accounting principles or law, or permitted by generally accepted accounting principles and deemed advisable by Trane’s regular independent public accountant (provided that Trane shall consult with Ingersoll Rand prior to any revaluation or change in accounting methods, principles or practices); or

 

   

effect or permit a plant closing or mass layoff without complying with the notice requirements and all other provisions of the Worker Adjustment and Retraining Notification Act.

Conduct of Business by Ingersoll Rand. Ingersoll Rand has agreed that, prior to the completion of the merger, unless Trane gives its prior written consent (which consent may not be unreasonably withheld, delayed or conditioned) or as required by applicable law or as otherwise expressly permitted or required by the merger agreement, it shall and shall cause its subsidiaries to:

 

   

carry on its business in all material respects in the ordinary course consistent with past practice; and

 

   

use commercially reasonable efforts to preserve substantially intact its current business organizations, keep available the services of its current officers, employees and consultants and preserve its relationships with customers, suppliers, licensors, licensees, distributors and others having business dealings with it.

Ingersoll Rand has also agreed that, prior to the completion of the merger, unless Trane gives its prior written consent (which consent will not be unreasonably withheld, delayed or conditioned), or as required by applicable law or as otherwise expressly permitted or required by the merger agreement, it shall not and shall not permit any of its subsidiaries to:

 

   

amend, or propose or agree to amend, its organizational documents in a manner that would adversely affect the completion of the merger, or that will affect the holders of Trane common stock whose shares are converted into Ingersoll Rand Class A common shares at the effective time of the merger in a manner different than holders of Ingersoll Rand Class A common shares prior to the effective time of the merger;

 

   

declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property) in respect of, any of its capital stock, other than regular quarterly dividends not in excess of $0.18 per share, with record and payment dates materially consistent with past practice;

 

   

purchase, redeem or otherwise acquire any shares of its capital stock or any other securities or any rights, warrants or options to acquire any such shares or other securities, except for purchases, redemptions or other acquisitions of capital stock or other securities (1) required by the terms of the Ingersoll Rand stock option plans or (2) required by the terms of any plans, arrangements or contracts existing as of December 15, 2007 between Ingersoll Rand or any of its subsidiaries and any director or employee of Ingersoll Rand or any of its subsidiaries; or

 

   

acquire (by merger, consolidation or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof, or dispose of assets or securities of Ingersoll Rand or its

 

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subsidiaries, in each case (x) if such acquisition or disposition would reasonably be expected to materially delay or impede the consummation of the merger or (y) if such acquisitions or dispositions would exceed a specified dollar amount.

No Solicitation. Trane has agreed not to and to cause its subsidiaries not to, and to use its reasonable best efforts to direct its and its subsidiaries’ directors, officers, employees, agents and representatives, including any investment banker, financial advisor, attorney, accountant or other advisor, agent, representative (acting in such capacity) or controlled affiliate not to, directly or indirectly through another person:

 

   

solicit, initiate or knowingly encourage, or knowingly facilitate, any takeover proposal, as described below, or the making or consummation of any takeover proposal; or

 

   

enter into, continue or otherwise participate in any discussions (except to notify a third party of the existence of the non-solicitation provisions) or negotiations regarding, or furnish to any person any information in connection with, or otherwise knowingly cooperate in any way with, any takeover proposal.

Trane is permitted to terminate, amend, modify, waive or fail to enforce any provision of any “standstill” or similar obligation of any person if Trane’s board of directors determines in good faith, after consultation with its outside legal counsel, that the failure to take such action could reasonably be determined to be inconsistent with its fiduciary duties under applicable law. In addition, under the merger agreement, Trane has agreed to, and to cause its subsidiaries to, and to use its reasonable best efforts to direct its and its subsidiaries’ representatives to, immediately cease and cause to be terminated all discussions or negotiations existing as of December 15, 2007 with any person with respect to any takeover proposal and request the prompt return or destruction of all confidential information previously furnished in connection therewith.

For purposes of the merger agreement, “takeover proposal” means any proposal or offer from any person (other than Ingersoll Rand or any of its subsidiaries or affiliates) relating to, or that could reasonably be expected to lead to:

 

   

any direct or indirect acquisition or purchase, in one transaction or a series of related transactions, of assets (including equity securities of any subsidiary of Trane) or businesses that constitute 15% or more of the assets of Trane and its subsidiaries, taken as a whole, or 15% or more of any class of equity securities of Trane;

 

   

any tender offer or exchange offer that if consummated would result in any person beneficially owning 15% or more of any class of equity securities of Trane; or

 

   

any merger, consolidation, business combination, recapitalization, liquidation, dissolution, joint venture, share exchange or similar transaction involving Trane or any of its subsidiaries, in each case, pursuant to which any person or the shareholders of any person would own 15% or more of any class of equity securities of Trane or of any resulting parent company of Trane,

in each case, other than the transactions contemplated by the merger agreement.

The merger agreement provides further that, notwithstanding the restrictions described above, if, at any time prior to the time Trane shareholders have adopted the merger agreement, in response to a bona fide written takeover proposal, (i) Trane and its representatives may contact the person making such proposal to clarify the terms and conditions of such proposal and (ii) if Trane’s board of directors determines in good faith (after consultation with its outside legal advisors and a financial advisor of nationally recognized reputation) that such takeover proposal constitutes or could reasonably be expected to lead to a superior proposal, as described below, then Trane and its representatives may, subject to compliance with its non-solicitation obligations described in this section and its obligation not to change its recommendation except as described in the section entitled “—Trane Shareholder Meeting and Duty to Recommend”:

 

   

furnish information with respect to Trane and its subsidiaries to the person making the takeover proposal (and its representatives) pursuant to a customary confidentiality agreement not less restrictive

 

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in the aggregate to that person than the provisions of the confidentiality agreement between Trane and Ingersoll Rand (it being understood that such confidentiality agreement need not contain any standstill or similar obligation), provided that all of the information to be furnished has previously been provided or made available to Ingersoll Rand or its representatives or is provided or made available to Ingersoll Rand or its representatives prior to or substantially concurrent with the time it is provided to such person; and

 

   

participate in discussions or negotiations with the person making the takeover proposal (and its representatives) regarding the takeover proposal.

The merger agreement provides that the term “superior proposal” means any bona fide offer made by a third party (other than Ingersoll Rand or any of its subsidiaries or affiliates) that if consummated would result in such person (or its shareholders) owning, directly or indirectly, more than 50% of the shares of Trane common stock then outstanding (or of the surviving entity in a merger or the direct or indirect parent of the surviving entity in a merger) or more than 50% of the assets of Trane, which Trane’s board of directors determines in good faith (after consultation with its outside legal advisors and a financial advisor of nationally recognized reputation) taking into account all financial, legal, regulatory and other aspects of such proposal (including any changes to the terms of the merger agreement proposed by Ingersoll Rand) to be (a) more favorable to the Trane shareholders from a financial point of view than the transactions contemplated by the merger agreement and (b) reasonably capable of being completed on terms set forth in the proposal.

Notwithstanding the restrictions described below regarding the ability of Trane’s board of directors to make a change in recommendation, (i) at any time prior to the time Trane shareholders have adopted the merger agreement, Trane’s board of directors may withdraw, modify or qualify in any manner adverse to Ingersoll Rand its recommendation to shareholders to adopt the merger agreement, or approve, adopt or recommend, or publicly propose to approve, adopt or recommend, a takeover proposal (any of such actions in this clause (i) are referred to in this proxy statement/prospectus, as a “change in recommendation by Trane’s board of directors”), if Trane’s board of directors determines in good faith, after consultation with its outside legal counsel, that the failure to take such action could reasonably be determined to be inconsistent with its fiduciary duties under applicable law and (ii) in response to a bona fide written takeover proposal that Trane’s board of directors determines in good faith (after consultation with outside legal advisors and a financial advisor of nationally recognized reputation) constitutes a superior proposal, Trane may terminate the merger agreement and, concurrently with such termination, may enter into a definitive agreement with respect to such superior proposal, provided, that:

 

   

Trane has provided to Ingersoll Rand three calendar days prior written notice advising Ingersoll Rand that Trane’s board of directors intends to take such action and specifying the reasons thereof; and

 

   

If such change in recommendation by Trane’s board of directors is not being made as a result of a superior proposal, during such three day period, if requested by Ingersoll Rand, Trane must have engaged in good faith negotiations with Ingersoll Rand to amend the merger agreement in such a manner that would otherwise obviate the need for such change in recommendation; or

 

   

If such change in recommendation by Trane’s board of directors or termination of the merger agreement by Trane is being made as a result of a superior proposal, the notice delivered to Ingersoll Rand described above must specify the material terms and conditions of any superior proposal and the identity of the person making the proposal (the parties have agreed that any material amendment to the financial terms of any such superior proposal (including any revision in price) will require a new notice and a new 24-hour period) and during such three-day period (or 24-hour period in the case of such amendment), if requested by Ingersoll Rand, Trane must have engaged in good faith negotiations with Ingersoll Rand regarding any amendment to the merger agreement proposed in writing by Ingersoll Rand, and in the case of a termination of the merger agreement by Trane as a result of a superior proposal, Trane must pay the termination fee payable to Ingersoll Rand prior to or concurrently with such termination as described below under “—Termination Fee.”

 

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The merger agreement provides that Trane must as promptly as practicable (and in any event within 24 hours after receipt) advise Ingersoll Rand orally and in writing of any takeover proposal, the material terms and conditions of any such takeover proposal (including any material changes thereto) and the identity of the person making the takeover proposal. Trane must also provide to Ingersoll Rand as soon as practicable after receipt or delivery thereof copies of all written material sent or provided to Trane or any of its subsidiaries from the person making such takeover proposal that describes any of the material terms or conditions of any such takeover proposal.

The merger agreement provides that the no-solicitation provisions described above or the obligations regarding the duty to recommend described below do not prohibit Trane’s board of directors from (i) taking and disclosing to Trane shareholders a position contemplated by Rule 14e-2(a) under the Exchange Act or making a statement contemplated by Item 1012(a) of Regulation M-A or Rule 14d-9 under the Exchange Act, or (ii) making any disclosure to the Trane shareholders if Trane’s board of directors determined in good faith, after consultation with its outside legal counsel, that the failure to make such disclosure could reasonably be determined to be inconsistent with applicable law. However, compliance with such rules will in no way limit or modify the effect that any such action has under the merger agreement, except that a “stop, look and listen” communication to the Trane shareholders pursuant to Rule 14d-9(f) of the Exchange Act (or any similar communication to the Trane shareholders) will not be deemed to be a change of recommendation by Trane’s board of directors.

Trane Shareholder Meeting and Duty to Recommend. The merger agreement requires Trane to take all actions necessary to duly call, give notice of, convene and hold the special meeting of its shareholders solely for the purpose of voting on the adoption of the merger agreement; provided, that Trane is permitted to delay or postpone convening the Trane shareholder meeting to the extent Trane’s board of directors or any committee thereof, after consultation with its outside legal counsel, reasonably believes that such delay or postponement is consistent with its fiduciary duties under applicable law. Subject to the exceptions described above, Trane’s board of directors has agreed to recommend that Trane’s shareholders vote in favor of adoption of the merger agreement and that it will not (i) withdraw, modify or qualify in a manner adverse to Ingersoll Rand that recommendation, (ii) approve, adopt or recommend, or publicly propose to approve, adopt or recommend, a takeover proposal, (iii) allow Trane or any of its subsidiaries to execute or enter into any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, option agreement, joint venture agreement, partnership agreement, or other similar contract (other than a confidentiality agreement under the circumstances described above) providing for, with respect to, or in connection with, any takeover proposal, or (iv) waive any provision of, terminate, amend or otherwise modify the Trane shareholder rights plan or redeem the rights issued thereunder (other than in connection with the transactions contemplated by the merger agreement).

Unless the merger agreement is terminated pursuant to, and in accordance with, the no-solicitation provisions described above, and subject to the foregoing paragraph, (i) the obligation of Trane to call, give notice of, convene and hold the Trane special meeting and to hold a vote of the Trane shareholders on the adoption of the merger agreement at the Trane special meeting will not be limited or otherwise affected by the commencement, disclosure, announcement or submission to it of any takeover proposal (whether or not a superior proposal), or by any change of recommendation by Trane’s board of directors, and (ii) in any case in which Trane’s board of directors make a change in recommendation as described above, (A) Trane will nevertheless submit the merger agreement and the merger to a vote of its shareholders and (B) this proxy statement/prospectus and any and all accompanying materials may include appropriate disclosure with respect to such change in recommendation by Trane’s board of directors.

Union Consultation. To the extent required by law or contract, Trane has agreed to use its reasonable best efforts to (i) furnish to any labor union, labor organization, works council or other collective group of employees which represents any group of employees of Trane, or with which Trane is otherwise required to negotiate or consult, information that may be required or advisable to provide; (ii) obtain consents or opinions from such

 

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organizations that may be required or advisable to obtain; and (iii) undertake any other actions that may be required to complete or effectuate matters contemplated by the merger agreement. Ingersoll Rand shall assist and cooperate with Trane in connection with Trane’s action described above.

Reasonable Best Efforts. Ingersoll Rand and Trane have agreed to use reasonable best efforts to take all actions and to do all things necessary, proper or advisable under applicable law to consummate the merger and the other transactions contemplated by the merger agreement, including preparing and filing as promptly as practicable all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents necessary to consummate the merger and the other transactions contemplated by the merger agreement.

Governmental Approvals. Ingersoll Rand and Trane have agreed to use their reasonable best efforts to obtain prompt termination of the waiting period under the HSR Act, as well as any other required waiting periods under applicable antitrust law. If any objections are asserted by any governmental entity with respect to the merger or if any litigation or proceedings are instituted by a governmental entity challenging the merger under applicable antitrust laws, or if any order is issued enjoining the merger under applicable antitrust laws, Ingersoll Rand and Trane have agreed to use reasonable best efforts to resolve the objections, litigation or proceedings, or to have the order vacated. Neither Ingersoll Rand nor Trane will acquire or agree to acquire any business, person, division or assets, or enter into any other transaction if entering into a definitive agreement relating to or the consummation of such acquisition or other transaction would be reasonably likely to materially increase the risk of not obtaining the applicable clearance, approval or waiver from a governmental entity charged with the enforcement of any antitrust law or materially delay obtaining such clearances, approvals or waivers.

Ingersoll Rand has agreed to propose, negotiate, offer to commit and effect (and if such offer is accepted, commit to and effect), by consent decree, hold separate order, or otherwise, the sale, divestiture or disposition of such assets or businesses of Ingersoll Rand or, effective as of the merger, Trane, or otherwise offer to take or offer to commit to take any action which it is capable of taking and if the offer is accepted, take or commit to take such action that limits its freedom of action, ownership or control with respect to, or its ability to retain or hold, any of the businesses, assets, product lines, properties or services of Ingersoll Rand or the surviving corporation, as may be required in order to avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining order, or other order in any suit or proceeding by a governmental entity, which would otherwise have the effect of preventing or materially delaying the consummation of the transactions contemplated by the merger agreement. Notwithstanding the foregoing sentence, Ingersoll Rand is not required to take any actions which would reasonably be expected to have a material adverse effect on Ingersoll Rand and Trane, taken as a whole.

Employee Benefits. For twelve months following completion of the merger, Ingersoll Rand has agreed with Trane that the employees of Trane that continue to be employees of Ingersoll Rand following the merger will be entitled to receive employee benefits, salary and bonus compensation opportunities that, in the aggregate, are no less favorable to the employee benefits, salary and bonus compensation opportunities received by those employees prior to the merger (excluding equity and equity-based awards). Ingersoll Rand will generally cause the surviving corporation to honor all benefit obligations to and contractual rights of employees of Trane and its subsidiaries under the Trane benefit plans, and will recognize service with Trane prior to the merger for purposes of eligibility and vesting under the benefit plans (but not for benefit accruals under any pension plan) in which Trane employees participate following the merger. Ingersoll Rand has agreed to provide employees whose employment terminates during the one-year period on or following the merger with severance benefits at levels no less than and pursuant to the terms of Trane’s severance plans or commitments applicable to such employee immediately prior to the merger. Ingersoll Rand has also agreed to honor the provisions of Trane’s retention plan, pursuant to its terms.

Repayment of Indebtedness. At the closing of the merger, Ingersoll Rand has agreed to provide Trane with the funds necessary to repay and discharge in full all amounts due under Trane’s existing credit facilities,

 

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including accrued and unpaid interest and any fees and expenses related to such prepayment. Unless Trane directs Ingersoll Rand prior to the closing to pay such amounts directly to Trane, Ingersoll Rand shall deliver such amounts directly to the lenders under such credit facilities on behalf of Trane.

Financing. Ingersoll Rand anticipates funding part of the cash merger consideration with debt financing. Ingersoll Rand has agreed to keep Trane reasonably informed on a current basis and in reasonable detail of the status of its effort to arrange such debt financing, and to provide copies of all documents related to the debt financing. Trane has agreed to provide, and to use reasonable best efforts to cause its independent auditors, counsel and other representatives to provide, all reasonable cooperation in connection with the arrangement of the debt financing as may be reasonably requested by Ingersoll Rand, unless such cooperation unreasonably interferes with the ongoing business of Trane. Specifically, Trane has agreed to:

 

   

arrange for senior management to (i) meet with rating agencies, prospective lenders and investors in presentations, meetings and due diligence sessions, (ii) provide reasonable and customary management and legal representations to auditors and (iii) provide reasonable assistance with the preparation of business projections and similar materials;

 

   

reasonably cooperate with the marketing efforts of Ingersoll Rand and its financing sources for any of the debt financing;

 

   

furnish Ingersoll Rand and its financing sources with financial and other pertinent information regarding Trane as may be reasonably requested by Ingersoll Rand;

 

   

use reasonable best efforts to obtain legal opinions relating to the debt financing as may reasonably be requested by Ingersoll Rand;

 

   

use reasonable best efforts to provide and execute necessary documents and certificates as may be reasonably requested by Ingersoll Rand; and

 

   

use reasonable best efforts to cause its independent accountants to provide assistance and cooperation with Ingersoll Rand in the preparation of an offering document for the debt financing.

Ingersoll Rand will promptly, upon request, reimburse Trane for all reasonable out of pocket costs (including reasonable attorneys’ fees) incurred by Trane or its officers, employees, advisors or other representatives in connection with Trane’s obligations pursuant to this provision. In addition, Ingersoll Rand will indemnify and hold harmless Trane and its subsidiaries and their respective representatives from any and all losses or damages suffered or incurred by them in connection with the arrangement of the debt financing and any information used in connection therewith. Ingersoll Rand acknowledged that the receipt of the debt financing is not a condition to Ingersoll Rand’s obligation to consummate the merger.

Ingersoll Rand Board Appointments. The merger agreement provides that, upon completion of the merger, Ingersoll Rand will appoint two members of Trane’s current board of directors, to be mutually agreed upon by Trane and Ingersoll Rand prior to the closing, to the Ingersoll Rand board of directors, and, following the merger, Ingersoll Rand has agreed to take all actions that are necessary to ensure that the two Trane designees are nominated for election to the Ingersoll Rand board of directors at each of the 2008, 2009 and 2010 annual shareholders meeting of Ingersoll Rand. As of the date of this proxy statement/prospectus, no determination has been made as to the identity of the two Trane designees that will be appointed to the Ingersoll Rand board of directors.

Takeover Laws. Trane has agreed to use reasonable best efforts to ensure that no state takeover or similar law becomes applicable to the merger agreement, the merger or the other transactions contemplated by the merger agreement, and if any takeover or similar law becomes applicable, to use reasonable best efforts to ensure the merger may be completed as promptly as practicable on the terms contemplated by the merger agreement and to otherwise minimize the effect of the takeover or similar law on the merger agreement and the merger.

 

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Conditions to the Merger

Conditions to Ingersoll Rand’s and Trane’s Obligations to Complete the Merger. Each party’s obligation to complete the merger is subject to the satisfaction or waiver of various conditions that include the following:

 

   

the merger agreement has been adopted by the affirmative vote of holders of a majority of the outstanding shares of Trane common stock at the special meeting or an adjournment or postponement thereof;

 

   

the Ingersoll Rand Class A common shares issuable to the shareholders of Trane pursuant to the merger agreement have been approved for listing on the NYSE, subject to official notice of issuance;

 

   

no temporary restraining order, preliminary or permanent injunction or other judgment, order or decree issued by a court or agency of competent jurisdiction located in the United States or in another jurisdiction outside of the United States in which Trane or any of its subsidiaries, or Ingersoll Rand or any of its subsidiaries, engage in business activities that prohibits the consummation of the merger have been issued and remain in effect, and no statute, law, ordinance, rule or regulation (domestic or foreign) shall have been enacted, issued, enforced, entered, or promulgated that prohibits or makes illegal the consummation of the merger;

 

   

all applicable waiting periods under the HSR Act shall have expired or been terminated and all consents required under any other antitrust laws in the European Union, China, Canada, South Africa and South Korea shall have been obtained or any applicable waiting period thereunder shall have expired or been terminated;

 

   

all other consents, approvals and authorizations of any governmental entity required for Trane, Ingersoll Rand or any of their subsidiaries to consummate the merger, the failure of which to be obtained or taken, individually or in the aggregate, would have a material adverse effect on Ingersoll Rand and Trane, taken as a whole, have been obtained; and

 

   

the registration statement on Form S-4, of which this proxy statement/prospectus forms a part, has become effective under the Securities Act and is not the subject of any stop order or proceedings seeking a stop order.

Conditions to Ingersoll Rand’s and Indian Merger Sub’s Obligation to Complete the Merger. Ingersoll Rand’s and Indian Merger Sub’s obligations to effect the merger are further subject to satisfaction or (to the extent permitted by law) waiver by Ingersoll Rand on or prior to the closing date of the following conditions:

 

   

the representations and warranties of Trane contained in the merger agreement with respect to (i) capitalization, (ii) due authorization, (iii) the absence of a material adverse effect on Trane since September 30, 2007, (iv) the vote required by Trane shareholders to adopt the merger agreement, (v) the inapplicability of state takeover laws to the transactions contemplated by the merger, and (vi) brokers’ and finders’ fees must, in each case, be true and correct in all material respects as of the date of the merger agreement and as of the closing date of the merger as though made on the closing date (except to the extent such representations and warranties expressly relate to a specified date, in which case such representations and warranties must be so true and correct as of such specified date);

 

   

the other representations and warranties of Trane contained in the merger agreement must be true and correct (without giving effect to any qualifications or limitations as to materiality or material adverse effect set forth therein) as of the date of the merger agreement and as of the closing date of the merger as though made on the closing date (except to the extent such representations and warranties expressly relate to a specified date, in which case such representations and warranties must be so true and correct as of such specified date), except for such failures to be true and correct that have not had and would not reasonably be expected to have, individually or in the aggregate, a Trane material adverse effect; and

 

   

Trane must have performed in all material respects all obligations required to be performed by it under the merger agreement at or prior to the closing date of the merger.

 

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Conditions to Trane’s Obligation to Complete the Merger. Trane’s obligation to effect the merger is further subject to satisfaction or (to the extent permitted by law) waiver by Trane on or prior to the closing date of the following conditions:

 

   

the representations and warranties of Ingersoll Rand and Indian Merger Sub contained in the merger agreement with respect to (i) capitalization, (ii) due authorization, (iii) the absence of a material adverse effect on Ingersoll Rand since September 30, 2007, (iv) the absence of a requirement that Ingersoll Rand’s shareholder vote to approve and consummate the merger, (v) the confirmation that Ingersoll Rand is not an “interested shareholder” for purposes of state takeover laws, including the applicable provisions of the DGCL, and (vi) brokers’ and finders’ fees, must, in each case, be true and correct in all material respects as of the date of the merger agreement and as of the closing date of the merger as though made on the closing date (except to the extent such representations and warranties expressly relate to a specified date, in which case such representations and warranties must be so true and correct as of such specified date);

 

   

the other representations and warranties of Ingersoll Rand and Indian Merger Sub contained in the merger agreement must be true and correct (without giving effect to any qualifications or limitations as to materiality or material adverse effect set forth therein) as of the date of the merger agreement and as of the closing date of the merger as though made on the closing date (except to the extent such representations and warranties expressly relate to a specified date, in which case such representations and warranties must be so true and correct as of such specified date), except for such failures to be true and correct that have not had and would not reasonably be expected to have, individually or in the aggregate, an Ingersoll Rand material adverse effect; and

 

   

Ingersoll Rand and Indian Merger Sub must have performed in all material respects all obligations required to be performed by them under the merger agreement at or prior to the closing date of the merger.

Termination

The merger agreement may be terminated and the merger may be abandoned at any time prior to the completion of the merger:

 

   

by mutual written consent of Ingersoll Rand, Trane and Indian Merger Sub, Inc.;

 

   

by either Ingersoll Rand or Trane if:

 

   

the merger has not been completed on or before September 15, 2008, provided that a party will not have the right to terminate the merger agreement in this circumstance if a material breach of a representation, warranty or covenant in the merger agreement by such party has been a principal cause of the failure of the merger to be completed on or before September 15, 2008;

 

   

a governmental entity that must grant an approval of the merger that is required as a condition to closing has denied granting such approval and such denial has become final and non-appealable, or any governmental entity has issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the merger, and such order, decree, ruling or action shall have become final and nonappealable, provided that, in each case, the right to terminate the merger agreement in these circumstances will not be available to any party whose material breach of the merger agreement has been the principal cause of such governmental action; or

 

   

the affirmative vote of holders of a majority of the outstanding shares of Trane common stock at the Trane special meeting or any adjournment or postponement thereof to adopt the merger agreement shall not have been obtained upon a vote taken thereon at the Trane special meeting duly convened therefor or at any adjournment or postponement of the special meeting.

 

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by Ingersoll Rand or Trane if the other party breaches or fails to perform any representation, warranty, covenant or agreement set forth in the merger agreement which breach or failure to perform (i) would give rise to the failure of a closing condition regarding the accuracy of the other party’s representations and warranties or the other party’s compliance with its covenants and agreements and (ii) is incapable of being cured by the breaching party by September 15, 2008 or, if capable of being cured, was not cured by the breaching party within thirty calendar days following receipt of a written notice of breach or failure to perform from the non-breaching party;

 

   

by Ingersoll Rand if prior to the adoption of the merger agreement by Trane shareholders,

 

   

(i) Trane’s board of directors has withdrawn, modified or qualified in a manner adverse to Ingersoll Rand its recommendation of the merger or Trane’s board of directors has approved, adopted or recommended or publicly proposed to approve, adopt or recommend, a takeover proposal (provided, that Ingersoll Rand’s right to terminate the merger agreement pursuant to this clause (i) in circumstances not involving a superior proposal will terminate twenty business days after Trane’s board of directors takes the action specified in clause (i) above);

 

   

(ii) a takeover proposal was publicly announced and Trane’s board of directors has failed to publicly reaffirm its recommendation of the merger agreement, the merger or the other transactions contemplated by the merger agreement within ten business days of a receipt of a written request to do so by Ingersoll Rand (provided, that Ingersoll Rand only has the right to request such reaffirmation, and Trane’s board of directors only has the obligation to make such public reaffirmation, on two occasions); or

 

   

(iii) Trane has materially breached its obligations or agreements regarding the non-solicitation of takeover proposals, the procedures relating to the Trane board of director’s ability to change its recommendation of the merger and terminate the merger agreement, or its obligation regarding the delivery of this proxy statement/prospectus or the calling and holding of the special meeting of Trane shareholders to adopt the merger agreement (excluding, in each case, inadvertent breaches or failures that are capable of being cured and that are cured within two business days following receipt of a written notice of such breach or failure from Ingersoll Rand);

 

   

by Trane, prior to the adoption of the merger agreement by the Trane shareholders, in accordance with and subject to the provisions described under “—Covenants and Agreements—No Solicitation” above; or

 

   

by Trane if all of the conditions to Ingersoll Rand’s obligations to consummate the merger have been satisfied (other than those conditions that by their nature are to be satisfied by actions taken at the closing, provided that such conditions are capable of being satisfied) and Ingersoll Rand has failed to consummate the merger within ten business days after satisfaction of such conditions.

Effect of Termination

If the merger agreement is terminated as described in “—Termination” above, the merger agreement will be void and have no effect, and there will be no liability or obligation of any party under the merger agreement except that:

 

   

no termination will relieve any party from any liability or damages resulting from the material breach by a party of any of its representations, warranties, covenants or agreements set forth in the merger agreement; and

 

   

designated provisions of the merger agreement, including (i) the confidential treatment of information (and attorney-client privileges in connection therewith), (ii) the ability of Trane to specifically enforce the merger agreement or pursue damages against Ingersoll Rand in the event of any breach by Ingersoll Rand, including the right to pursue damages on behalf of Trane shareholders for the loss of the merger consideration in the event of a failure by Ingersoll Rand to consummate the merger when the closing conditions have otherwise been satisfied or a breach by Ingersoll Rand that contributes to a failure of a

 

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closing condition, and (iii) the allocation of fees and expenses, including, if applicable, the termination fees described below, will survive termination. In addition, the confidentiality agreement, including the standstill provisions contained therein, between Trane and Ingersoll Rand will survive the termination of the merger agreement.

Termination Fee

A termination fee of $315,000,000 will be payable by Trane to Ingersoll Rand as follows:

 

   

if Ingersoll Rand terminates the merger agreement prior to the adoption of the merger agreement by the Trane shareholders, because Trane’s board of directors has withdrawn, modified or qualified in any manner adverse to Ingersoll Rand the Trane board of directors’ recommendation of the merger agreement or approved, adopted or recommended, or publicly proposed to approve, adopt or recommend, a takeover proposal; or

 

   

if Trane terminates the merger agreement prior to the adoption of the merger agreement by the Trane shareholders in accordance with and subject to the terms and conditions described under “—Covenants and Agreements—No Solicitation” above;

in either case, Trane will be obligated to pay Ingersoll Rand the full termination fee of $315,000,000 on the first business day following the termination (in the case of a termination by Ingersoll Rand as described above) or on the date of such termination (in the case of a termination by Trane as described above); or

 

   

If Ingersoll Rand or Trane terminates the merger agreement due to:

 

   

the failure of the merger to be completed by September 15, 2008; or

 

   

the failure of the Trane shareholders to adopt the merger agreement at the special meeting; or

 

   

if, prior to adoption of the merger agreement by Trane shareholders, Ingersoll Rand terminates the merger agreement due to:

 

   

a failure by Trane’s board of directors to publicly reaffirm its recommendation of the merger agreement, the merger or the other transactions contemplated by the merger agreement within ten business days of a receipt of a written request to do so by Ingersoll Rand (as described above under “—Termination”); or

 

   

a material breach by Trane of its obligations or agreements regarding the non-solicitation of takeover proposals, the procedures relating to the Trane board of director’s ability to change its recommendation of the merger and terminate the merger agreement, or its obligation regarding the delivery of this proxy statement/prospectus or the calling and holding of the special meeting of Trane shareholders to adopt the merger agreement (excluding, in each case, inadvertent breaches or failures that are capable of being cured and that are cured within two business days following receipt of a written notice of such breach or failure from Ingersoll Rand) (in each case, as described above under “—Termination”); and

 

   

prior to any such termination, a takeover proposal has been publicly disclosed or any person has publicly announced an intention (whether or not conditional) to make a takeover proposal, and, in each case, not publicly withdrawn at the time of termination described above;

then, if within nine months after the termination of the merger agreement described above, Trane enters into a definitive agreement with respect to, or consummates, any takeover proposal (regardless of whether such takeover proposal is the same as the takeover proposal that was publicly disclosed or announced prior to the termination of the merger agreement), then Trane will be obligated to pay to Ingersoll Rand the full termination fee of $315,000,000 on the earlier of such execution or consummation. For purposes of determining whether the termination fee is payable under the circumstances described in the previous sentence, the term takeover proposal has the meaning described under “—Covenants and Agreements—No Solicitation,” except that the references to “15% or more” in the definition of takeover proposal will be deemed to be references to “a majority.”

 

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The merger agreement further provides that Trane will not be required to pay the termination fee on more than one occasion. In addition, if Ingersoll Rand receives the termination fee from Trane, the payment of the termination fee will be Ingersoll Rand’s sole and exclusive remedy against Trane and its subsidiaries and affiliates and none of Trane, its subsidiaries or affiliates will have any further liability of obligation relating to or arising out of the merger agreement or the transactions contemplated thereby. Finally, if Ingersoll Rand or Indian Merger Sub receives any payments from Trane in respect of any breach by Trane of the merger agreement, and thereafter Ingersoll Rand is entitled to receive the termination fee as described above, the amount of such termination fee will be reduced by the aggregate amount of any payments made by Trane to Ingersoll Rand or Indian Merger Sub in respect of any such breaches of the merger agreement.

Amendment and Waiver

Amendment. The merger agreement may be amended solely by an instrument in writing signed on behalf of the parties, either before or after the Trane shareholders have adopted the merger agreement. However, following such adoption of the merger agreement by the Trane shareholders, no amendment may be made that by law requires further approval of Trane shareholders unless the required approval is obtained.

Waiver. At any time prior to the effective time of the merger, Ingersoll Rand and Trane may:

 

   

extend the time of performance of any of the obligations or other acts of the other parties;

 

   

to the extent permitted by law, waive any inaccuracies in the representations and warranties contained in the merger agreement or in any document delivered pursuant to the merger agreement; or

 

   

to the extent permitted by law, waive compliance with any of the agreements or conditions contained in the merger agreement.

Specific Performance; Third-Party Beneficiaries

Specific Performance. The parties to the merger agreement are entitled to an injunction or injunctions to prevent breaches of the merger agreement and to enforce specifically the terms and provisions of the merger agreement in the Court of Chancery of the State of Delaware or any court of the United States located in the State of Delaware, this being in addition to any other remedy to which the parties are entitled at law or in equity.

Third-Party Beneficiaries. The merger agreement is not intended to and does not confer upon any person other than the parties thereto any legal or equitable rights or remedies, except for:

 

   

the right of the holders of Trane common stock, the Trane restricted stock units and the Trane stock options to receive, from and after the closing of the merger, the aggregate consideration which they are entitled to receive pursuant to the merger agreement;

 

   

the right of Trane, on behalf of the holders of Trane common stock, the Trane stock options or Trane restricted stock units, to pursue damages in respect of the loss of the right to receive the aggregate consideration pursuant which they are entitled to receive pursuant to the merger agreement in the event of a failure by Ingersoll Rand to effect the merger as required by the merger agreement or a material breach by Ingersoll Rand that contributed to a failure of any of the conditions to closing from being satisfied; and

 

   

from and after the effective time of the merger, the provisions in the merger agreement relating to indemnification and exculpation from liability for the directors and officers of Trane.

 

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DESCRIPTION OF DEBT FINANCING

Overview

In connection with the merger agreement, Ingersoll Rand and a wholly-owned subsidiary of Ingersoll Rand (collectively, the “Borrowers”) will enter into a new senior unsecured bridge facility with JPMorgan Chase Bank, N.A. (“JPMCB”), as administrative agent. The new senior unsecured bridge facility will have a term of 364 days and provide senior unsecured financing of up to $3,900,000,000. The proceeds of the new senior unsecured bridge facility will be used to pay certain fees and expenses in connection with the merger and a portion of the cash portion of the merger consideration.

The commitment to provide the financing is granted, subject to certain conditions, pursuant to a debt commitment letter, dated December 15, 2007 (the “Debt Commitment Letter”), from JPMCB, J.P. Morgan Securities, Inc., Credit Suisse, Cayman Islands Branch, Credit Suisse Securities (USA) LLC, Goldman Sachs Credit Partners L.P. and Goldman Sachs Bank USA to the Borrowers and will expire on September 30, 2008.

A copy of the Debt Commitment Letter is filed as an exhibit to the Ingersoll Rand reports incorporated by reference in this proxy statement/prospectus, see “Where You Can Find More Information” beginning on page 124. You are urged to read that document carefully.

Interest Rate

Borrowings under the new senior unsecured bridge facility will bear interest, at the Borrowers’ option, at a rate equal to either (a) a base rate determined by reference to the higher of (1) JPMCB’s “prime commercial lending rate” and (2) the federal funds effective rate, as published by the Federal Reserve Bank of New York, plus  1/2 of 1.0% or (b) a LIBOR rate as reflected on the applicable Reuters SCREEN, for the corresponding deposits of U.S. dollars for the interest period relevant to such borrowing plus the applicable margin. The applicable margin for borrowings under the new senior unsecured bridge facility may change depending on Ingersoll Rand’s achievement of certain ratings.

Prepayments and Redemptions

Subject to certain exceptions, the new senior unsecured bridge facility will require the Borrowers to prepay outstanding loans:

 

   

with the net proceeds of the sale of any assets outside the ordinary course of business (including, without limitation, insurance and condemnation proceeds);

 

   

with the net proceeds of the issuance of debt obligations and equity securities; and

 

   

in an amount not less than $500,000,000 within 30 business days of the consummation of the merger.

Any such prepayment will be accompanied by a pro rata reduction in the lenders’ commitments under the facility.

The Borrowers expect to refinance one of their existing credit facilities (referred to in the “Guarantee” section below) in an amount up to $1,500,000,000 and any proceeds received in excess of $750,000,000 will be used first to finance the merger, and to the extent so used, will also reduce the lenders’ commitments under the new unsecured bridge facility.

The Borrowers may voluntarily repay outstanding loans, in whole or in part, at their option at any time upon three days’ prior notice, at par plus accrued and unpaid interest and subject to, in the case of loans based on LIBOR, customary “breakage” costs with respect to such LIBOR loans.

 

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Guarantee

All obligations under the senior unsecured bridge facility will be jointly and severally guaranteed on a senior basis by the Borrowers and any other entities that guarantee (i) as of the date of consummation of the merger, Ingersoll Rand’s outstanding notes and debentures or indebtedness under the credit agreement dated as of August 12, 2005 among, inter alia, the Borrowers and the banks listed therein or (ii) any other indebtedness the proceeds of which are required to be applied to prepay the new senior secured revolving bridge facility.

Covenants and Events of Default

The new senior unsecured bridge facility will contain negative and affirmative covenants and events of default substantially similar to those in the Borrowers’ existing credit facilities.

 

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THE STOCK OPTION ELECTION

In addition to other employees, the executive officers and directors of Trane hold Trane equity awards in the form of vested and unvested stock options under Trane’s Stock Incentive Plan and Trane’s 2002 Omnibus Incentive Plan. In this proxy statement/prospectus, we refer to these Trane vested and unvested stock options as Trane stock options. The following section describes the treatment of Trane stock options pursuant to the terms of the merger agreement and mechanics by which holders of Trane stock options may elect to have some or all of their Trane stock options converted into Ingersoll Rand stock options (a “roll-over election”) or cashed out (a “cash-out election”). For more information, please refer to the section entitled “The Merger Agreement—Treatment of Stock Options” beginning on page 69.

Trane’s board of directors makes no recommendation as to whether any holder of any Trane stock options should elect to convert his or her Trane stock options into Ingersoll Rand stock options and makes no recommendation regarding the Ingersoll Rand Class A common shares that underlie those Ingersoll Rand stock options.

Trane Stock Option Election

Accelerated Vesting. As of the effective time of the merger, each outstanding Trane stock option to acquire shares of Trane common stock will, whether or not exercisable or vested at the effective time, become fully vested and exercisable.

Option Election. Except with respect to Trane stock options (i) held by the specified option holders, or (ii) that are ISOs or held by individuals issued under a tax-qualified sub-plan under the laws of France (as described below), the holders of all other Trane stock options are entitled to make a “roll-over election” or a “cash-out election” (by following the election procedure described below) with respect to how the Trane stock options held by such individuals will be treated in the merger and such elections will be effective and not subject to cutbacks, prorations or other restrictions so long as Trane receives a validly completed option election form as described below and in the instructions and election form accompanying this proxy statement/prospectus. The treatment of Trane stock options for which a “roll-over election” or a “cash-out election” has been made is described in the section entitled “The Merger Agreement—Treatment of Stock Options” beginning on page 69.

Invalid Election or No Option Election. In the event that a holder of Trane stock options fails to make a valid election with respect to the treatment of his or her Trane stock options pursuant to election provision described below, the Trane stock options held by such individual will be treated in the merger as follows:

 

   

Trane stock options issued under Trane’s Stock Incentive Plan will be converted into (“rolled-over”) options to purchase Ingersoll Rand Class A common shares as described in the section entitled “The Merger Agreement—Treatment of Stock Options” beginning on page 69; and

 

   

Trane stock options issued under Trane’s 2002 Omnibus Incentive Plan will be converted into (“cashed-out”) the right to receive the cash payment as described in the section entitled “The Merger Agreement—Treatment of Stock Options” beginning on page 69.

France Options; ISOs. Holders of Trane stock options that are issued under a tax-qualified sub-plan under the laws of France and holders of ISOs will not be entitled to make the option election described above, but rather, such Trane stock options will be converted automatically in the merger, without any further action required by such holder, into options to purchase Ingersoll Rand Class A common shares as described under the section entitled “The Merger Agreement—Treatment of Stock Options” beginning on page 69.

Election Mechanics

Each person who is a holder of a Trane stock option as of the option calculation date (as defined below) has the right to make an option election by specifying the number of Trane stock options with respect to which that holder desires to make a cash-out election or a roll-over election. Holders of Trane stock options may make this election with respect to some or all of their Trane stock options (on a grant-by-grant basis).

 

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All cash-out elections and roll-over elections must be completed according to the instructions provided in the option election package that is being mailed to holders of Trane stock options together with this proxy statement/prospectus. To be valid, an election must be made according to such instructions by the option calculation date, which is 5:00 p.m., eastern time, on                     , 2008.

Holders of Trane stock options may change or revoke their elections by properly making a revised option election prior to 5:00 p.m. eastern time on the option calculation date, according to the instructions provided in the option election package. If a holder properly makes a revised option election with respect to any Trane stock options prior to the option calculation date, all prior option elections with respect to those Trane stock options for which a revised option election is properly made will be revoked. All option elections will automatically be revoked if the merger agreement is terminated.

Election Forms and Related Documents

An option election package is being mailed with this proxy statement/prospectus to all holders of Trane stock options as of the record date. In addition, an option election package will be sent to those holders of Trane stock options who acquire Trane stock options after the record date. The option election package will contain instructions on how a holder of Trane stock options can make an option election with respect to their options.

Please carefully read the documents contained in the Trane stock option election package, including the information booklet provided in that package.

 

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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA OF INGERSOLL RAND

The unaudited pro forma combined condensed financial statements are based upon the historical consolidated financial statements and notes thereto of Ingersoll Rand and Trane and have been prepared to illustrate the effect of the merger in which Trane will become a wholly-owned subsidiary of Ingersoll Rand.

The Unaudited Pro Forma Combined Condensed Balance Sheet Information set forth below has been provided after giving effect to the merger as if it had occurred on December 31, 2007. The Unaudited Pro Forma Combined Condensed Income Statement Information set forth below has been presented after giving effect to the merger as if it had occurred on January 1, 2007.

The unaudited pro forma combined condensed financial statements presented herein give effect to Ingersoll Rand’s acquisition of all of the outstanding shares of Trane common stock (194.5 million), restricted stock units (0.3 million) and stock options (14.0 million) at December 31, 2007 in exchange for:

 

   

the issuance of 44.8 million of Ingersoll Rand Class A common shares. The value of Ingersoll Rand Class A common shares issued in the merger is assumed to be $44.78 per share based on the volume weighted average of the closing trading prices on the announcement date, for the two days immediately prior to and two days immediately subsequent to the announcement date of the Trane acquisition;

 

   

the payment of $7,109.9 million in cash ($36.50 per outstanding share of Trane common stock and restricted stock units);

 

   

the payment of $148.4 million in cash in exchange for certain Trane stock options (approximately 5.8 million) calculated using the Cash-Out Amount described in this proxy statement/prospectus in the section entitled “The Merger Agreement—Treatment of Stock Options” beginning on page 69; and

 

   

the fair value of 8.2 million Trane stock options converted to Ingersoll Rand stock options, estimated to be $199.2 million, using the Black-Scholes option pricing model.

The unaudited pro forma combined condensed financial statements also give effect to the issuance of $4,800.0 million in additional debt which will be used to partially fund (a) the cash portion of the purchase price and (b) an estimate of the out-of-pocket transaction costs of Ingersoll Rand associated with the merger.

The acquisition has been accounted for using the purchase method of accounting in accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations. Under the purchase method of accounting, the total estimated purchase price, calculated as described in Note 3 to these unaudited pro forma combined condensed financial statements, has been preliminarily allocated to the net tangible and intangible assets acquired and liabilities assumed of Trane based on their estimated fair values. Ingersoll Rand’s management has made a preliminary allocation of the estimated purchase price to the tangible and intangible assets acquired and liabilities assumed based on various preliminary estimates. Since these unaudited pro forma condensed combined financial statements have been prepared based on preliminary estimates of purchase consideration and fair values attributable to the merger, the actual amounts recorded for the merger may differ from the information presented. The estimation and allocations of purchase consideration are subject to change pending further review of the fair value of the assets acquired and liabilities assumed and actual transaction costs. A final determination of fair values will be based on the actual net tangible and intangible assets and liabilities of Trane that will exist on the date of completion of the merger.

The unaudited pro forma combined condensed financial statements do not reflect future events that may occur after the Trane acquisition, including the expected refinancing of the $4,800.0 million in short-term debt, the potential realization of operating cost savings, revenue synergies or restructuring or other costs (other than Ingersoll Rand’s and Trane’s out-of-pocket transaction costs reflected in the unaudited pro forma combined condensed balance sheet) relating to the integration of the two companies nor do they include any other non-recurring costs related to the merger. The unaudited combined condensed pro forma financial statements were prepared in accordance with the regulations of the SEC and are not reflective of the actual results that are expected in future periods once the merger is complete.

 

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The unaudited pro forma information is provided for informational purposes only and is not necessarily indicative of the financial position or results of operations that would have occurred if the merger had been completed on the dates indicated, nor is it necessarily indicative of the future operating results or financial position of the combined company. In addition, the unaudited pro forma financial information does not purport to indicate balance sheet data or results of operations data as of any future date or any future period. The pro forma adjustments are based upon available information and certain assumptions that Ingersoll Rand believes are reasonable.

The accompanying unaudited pro forma combined condensed financial data should be read in conjunction with the historical financial statements and the accompanying disclosures of Ingersoll Rand and Trane, which are incorporated by reference in this proxy statement/prospectus.

 

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Ingersoll-Rand Company Limited

Unaudited Pro Forma Combined Condensed Balance Sheet Information

(in millions)

 

     As of December 31, 2007
     Ingersoll Rand    Trane    Pro Forma
Adjustments
    Pro Forma
as Adjusted

Assets

          

Current assets:

          

Cash and cash equivalents

   $ 4,735.3    $ 902.5    $ (2,518.3 )(12)   $ 3,119.5

Marketable securities

     0.1      —        —         0.1

Accounts and notes receivable

     1,660.7      1,138.5      —         2,799.2

Inventories

     827.2      697.3      178.5  (1)     1,703.0

Prepaid expenses and other current assets

     477.4      314.1      —         791.5
                            

Total current assets

     7,700.7      3,052.4      (2,339.8 )     8,413.3

Property, plant and equipment, net

     904.9      920.9      230.2  (2)     2,056.0

Goodwill

     3,993.3      318.5      5,896.2  (3)     10,208.0

Intangibles

     724.6      —        4,475.0  (3)     5,199.6

Other assets

     1,052.7      805.5      10.0  (4)     1,868.2
                            

Total assets

   $ 14,376.2    $ 5,097.3    $ 8,271.6     $ 27,745.1
                            

Liabilities and Shareholders’ Equity

          

Current liabilities:

          

Accounts payable

   $ 721.2    $ 484.6    $ —       $ 1,205.8

Accrued compensation and benefits

     338.9      279.0      —         617.9

Accrued expenses and other current liabilities

     1,434.6      1,103.2      188.3  (5)(3)     2,726.1

Short-term borrowings and current maturities of long-term debt

     741.0      372.3      4,800.0  (4)     5,913.3
                            

Total current liabilities

     3,235.7      2,239.1      4,988.3       10,463.1

Long-term debt

     712.7      687.2      23.0  (3)     1,422.9

Post-employment and other benefit liabilities

     941.9      311.5      —         1,253.4

Other non-current liabilities

     1,480.5      1,312.7      1,592.9  (5)     4,386.1

Minority interest

     97.5      8.6      —         106.1

Total shareholders’ equity

     7,907.9      538.2      1,667.4  (6)     10,113.5
                            

Total liabilities and shareholders’ equity

   $ 14,376.2    $ 5,097.3    $ 8,271.6     $ 27,745.1
                            

See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Data.

 

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Ingersoll-Rand Company Limited

Unaudited Pro Forma Combined Condensed Income Statement Information

(in millions, except per share data)

 

     For the Year Ended December 31, 2007  
     Ingersoll Rand     Trane     Pro Forma
Adjustments
    Pro Forma
as Adjusted
 

Net revenues

   $ 8,763.1     $ 7,449.6     $ —       $ 16,212.7  

Cost of goods sold

     (6,272.0 )     (5,331.9 )     (27.6 )(8)     (11,631.5 )

Selling and administrative expenses

     (1,433.3 )     (1,400.2 )     (112.3 )(8)     (2,945.8 )
                                

Operating income

     1,057.8       717.5       (139.9 )     1,635.4  

Interest expense

     (136.2 )     (109.6 )     (326.3 )(9)     (572.1 )

Other income (expense), net

     15.9       (5.5 )     —         10.4  
                                

Earnings from continuing operations before income taxes

     937.5       602.4       (466.2 )     1,073.7  

Provision for income taxes

     (204.4 )     (202.2 )     163.2  (10)     (243.4 )
                                

Earnings from continuing operations

   $ 733.1     $ 400.2     $ (303.0 )   $ 830.3  
                                

Earnings from continuing operations per share

        

Basic

   $ 2.52     $ 2.01       —       $ 2.47  

Diluted

   $ 2.48     $ 1.96       —       $ 2.41  

Weighted average shares

        

Weighted average basic shares

     290.7       199.0       (154.2 )(11)     335.5  

Effect of dilutive options

     4.6       5.5       (1.2 )(11)     8.9  
                                

Weighted average diluted shares

     295.3       204.5       (155.4 )     344.4  

See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Data.

 

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INGERSOLL-RAND COMPANY LIMITED

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA

 

1. Reflects an adjustment of $178.5 million to record Trane inventory at its estimated fair value. In connection with the merger, Ingersoll Rand is required to record Trane’s inventory on its consolidated balance sheet at its fair value. Ingersoll Rand’s assumed fair value of Trane’s inventory may change as it will engage third party appraisers to assist Ingersoll Rand’s management in the valuation of Trane’s inventory after the completion of the merger. Ingersoll Rand’s pro forma fair value adjustment to inventory is based on Trane’s inventory at December 31, 2007, as well as fair value adjustments to inventory in recent acquisitions of companies with assets similar to Trane. In addition, as Ingersoll Rand sells the acquired inventory, its cost of sales will reflect the increased valuation, if any, of Trane’s inventory, which will temporarily reduce Ingersoll Rand’s gross margins until such inventory is sold. This is considered a non-recurring adjustment and as such is not included in the Unaudited Pro Forma Combined Condensed Income Statement Information.

 

2. Reflects an adjustment to record Trane’s property, plant and equipment at an assumed fair value (resulting in an increase in property, plant and equipment of $230.2 million). Ingersoll Rand’s assumptions as to the fair value of Trane’s property, plant and equipment will change as it conducts, with the assistance of a third party appraiser, a valuation of Trane’s property, plant and equipment following the completion of the merger. Ingersoll Rand’s pro forma adjustment to property, plant and equipment, net equals 25% of historical net book value, which was derived based on adjustments recorded in recent acquisitions of other companies with assets similar to Trane.

 

3. The computation of the total purchase price, excess of the purchase price over the book values of the assets acquired and liabilities assumed, and the resulting adjustment to goodwill are as follows (in millions):

 

Total stock consideration

   $ 2,006.4 (7)

Total cash consideration for Trane stock and restricted stock units

     7,109.9 (7)

Estimated cash consideration for Trane stock options

     148.4 (7)

Estimated fair value of Trane stock options converted to Ingersoll Rand stock options

     199.2 (7)

Estimated transaction costs of Ingersoll Rand

     50.0  
        

Total estimated purchase price

     9,513.9  

Net book value of Trane assets and liabilities acquired

     538.2  

Less: Merger and transaction costs of Trane

     (80.0 )

Less: Trane goodwill acquired

     (318.5 )
        

Net tangible book value of Trane assets and liabilities acquired

     139.7  
        

Excess of purchase price over net tangible book value of Trane assets and liabilities acquired

     9,374.2  

Adjustments to goodwill related to:

  

Inventories

     (178.5 )

Property, plant and equipment

     (230.2 )

Deferred tax liability

     1,701.2  

Identifiable intangibles, excluding tradenames

     (2,831.0 )

Tradenames

     (1,644.0 )

Fair value adjustment to Trane debt acquired

     23.0  
        

Total adjustments

     (3,159.5 )
        

Gross adjustment to goodwill

     6,214.7  

Less: Trane goodwill already recorded

     (318.5 )
        

Net adjustment to goodwill

   $ 5,896.2  
        

 

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For the purpose of preparing the pro forma financial information, the total estimated purchase price is allocated to Trane’s net tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of December 31, 2007. Final allocation of the purchase price will be based on the actual fair values of assets acquired and liabilities assumed following the completion of the merger. Accordingly, the fair value of these assets and liabilities included in the table above is preliminary, and is subject to change pending additional information that may become known to Ingersoll Rand and Trane. An allocation of an increased portion of the purchase price to inventory, property, plant and equipment or any allocation to identifiable intangible assets will reduce the amount of the purchase price allocated to goodwill in the unaudited combined condensed financial statement information, and may result in increased depreciation and/or amortization expense.

A preliminary estimate of $2,831.0 million has been allocated to amortizable intangible assets acquired, primarily consisting of customer relationships and developed technology. Amortization related to the fair value of amortizable intangible assets, taken over an average life of 25 years and 5 years, respectively, for customer relationships and developed technologies, are reflected as pro forma adjustments to the unaudited pro forma combined condensed income statement.

Ingersoll Rand has allocated approximately $1,644.0 million to tradenames, primarily related to the Trane brand. Ingersoll Rand’s management took many factors into consideration including the current market leadership position of the brand as well as its recognition worldwide in the industry in coming to the determination that it will account for the asset as an indefinite lived intangible asset. Therefore, in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, tradenames will not be amortized but instead will be tested for impairment at least annually (more frequently if certain indicators are present).

 

4. Reflects expected future borrowings of $3,900.0 million under a new senior unsecured bridge facility and issuance of $900.0 million of commercial paper to partially fund (a) the cash portion of the purchase price and (b) an estimate of the out-of-pocket transaction costs of Ingersoll Rand associated with the Trane acquisition ($50.0 million). Ingersoll Rand expects to pay approximately $10.0 million in fees to borrow the $4,800.0 million. Accordingly, such fees are presented in Other assets as deferred debt issuance costs.

 

5. Represents the estimated deferred income tax liability, based on an estimated U.S. Federal statutory tax rate of 35.0%, multiplied by the value of purchase price allocation adjustments made to assets and liabilities, excluding goodwill.

 

6. Reflects the estimated stock consideration of $2,006.4 million, the estimated fair value of Trane stock options converted to Ingersoll Rand stock options of $199.2 million less the elimination of Trane’s shareholders’ equity of $538.2 million. For purposes of valuing the stock consideration, Ingersoll Rand’s Class A common shares are valued at $44.78 per share, which is the volume weighted average of the closing trading prices on the announcement date, for the two days immediately prior to and immediately subsequent to the announcement date of the Trane acquisition. See Note 7 below.

 

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7. The calculation of the purchase price paid by Ingersoll Rand is as follows (in millions, except per share data and the conversion factor):

 

Stock Portion of Purchase Price

  

Trane shares outstanding and restricted stock units at December 31, 2007

     194.8

Conversion factor

     0.23
      

Ingersoll Rand Class A common shares to be issued

     44.8

Ingersoll Rand price per share

   $ 44.78
      

Total stock consideration

   $ 2,006.4
      

Cash Portion of Purchase Price

  

Trane shares outstanding and restricted stock units at December 31, 2007

     194.8

Cash consideration per share

   $ 36.50
      

Cash consideration for outstanding shares

   $ 7,109.9

Cash consideration for Trane stock options

   $ 148.4
      

Total cash consideration

   $ 7,258.3
      

Fair Value of Stock Options

  

Estimated fair value of Trane stock options converted to Ingersoll Rand stock options

   $ 199.2
      

Under limited circumstances under the merger agreement, Ingersoll Rand will increase, by up to $1.00 per share, the amount of cash to be included in the merger consideration and decrease the fraction of a share of Ingersoll Rand Class A common shares by an amount having an equivalent value (based on the average price of Ingersoll Rand Class A common shares during a specified period prior to closing) as the amount of the increase in cash. If Ingersoll Rand were to increase the cash portion of the purchase price, the effect would be a decrease in Ingersoll Rand’s cash balance and a decrease in equity. Were Ingersoll Rand to increase the amount of cash paid per share by $1.00, based on a $44.78 price per share of Ingersoll Rand Class A common shares, the conversion factor would be reduced to 0.21 and cash consideration would increase to $37.50 per share. The increase to pro forma earnings per share amounts would be approximately 1%.

In accordance with SFAS No. 123(R), the fair value of Trane stock options that will be converted into Ingersoll Rand options (hereinafter called the “converted options”) will be recognized as a component of the purchase price, based on the fair value of the options, as described below.

The unaudited pro forma combined condensed financial statements assume 8.2 million of Trane stock options would be converted into options to acquire shares of Ingersoll Rand Class A common shares based on the option exchange rate set forth in the merger agreement. All other Trane stock options are assumed to be exchanged for cash.

The additional purchase price of $199.2 million (weighted-average fair value of $25.31 per share) was calculated using the Black-Scholes option pricing model which considered the market price of Ingersoll Rand’s Class A common shares of $44.78 per share and the following assumptions:

 

Expected option life (in years)

     4.70

Volatility

   26.10%

Risk-free rate

     4.71%

Dividend yield

     1.75%

The expected life of the options was determined by taking into account the contractual life of the options, the accelerated vesting of all Trane options at the date of the acquisition, and estimated attrition of the option holders. The volatility assumption used was derived using historical data over a period commensurate with the expected option life assumption.

 

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Ingersoll Rand believes that the fair value of the Ingersoll Rand stock options approximates the fair value of Trane’s stock options. Accordingly, the fair value of the converted stock options was recognized as a component of the purchase price and no additional amounts have been reflected as compensation expense. Ingersoll Rand will also recalculate the fair values of the Trane options and the converted options as of the merger consummation date, in accordance with SFAS No. 123(R), to determine the fair value amounts, if any, to be recorded as compensation expense.

 

8. Represents the estimate of the increase in amortization and depreciation expense associated with the fair value adjustment to Trane’s property, plant and equipment and the allocation of purchase price to certain intangible assets such as developed technology and customer relationships. Ingersoll Rand records their depreciation and amortization in cost of goods sold and selling and administrative expenses.

The increase in depreciation expense is based on a 25% increase in the book value of Trane’s property, plant and equipment due to purchase accounting and is allocated based on Ingersoll Rand’s historical allocation of depreciation expense to cost of sales and selling and administrative expenses. For purposes of the depreciation adjustment, Ingersoll Rand considers the useful lives of additional property, plant and equipment to be 20 years.

The increase in amortization expense is based on a preliminary allocation of purchase price to certain intangible assets acquired and is allocated to cost of goods sold and selling and administrative expenses based on the nature of the intangible. For purposes of the amortization adjustment, Ingersoll Rand considers the useful lives of the developed technology and customer relationships to be 5 years and 25 years, respectively.

As indicated in Note 3 above, valuations of Trane’s property, plant and equipment and allocation of purchase price to identifiable intangible assets have not been completed and such amounts are based on Ingersoll Rand’s preliminary estimate. If such estimates were to increase by 5%, pro forma earnings from continuing operations would decrease by $7.0 million for the year ended December 31, 2007 and the pro forma basic and diluted earnings per share would decrease by $0.02 for the year ended December 31, 2007.

 

9. Represents the estimate of the increase in interest expense, using a weighted average interest rate of 6.8%, associated with the borrowings under Ingersoll Rand’s new senior unsecured bridge facility and issuance of commercial paper partially to fund (a) the cash portion of the purchase price and (b) an estimate of the out-of-pocket transaction costs of Ingersoll-Rand associated with the Trane acquisition ($50.0 million). For purposes of calculating the pro forma interest expense in the Unaudited Pro Forma Combined Condensed Income Statement Information, Ingersoll Rand has assumed the cash proceeds received from the divestitures of Bobcat, Utility Equipment, Attachments and Road Development business units were available as of January 1, 2007 to fund the Trane acquisition as of January 1, 2007.

Actual interest rates in the transaction can vary from the 6.8% depicted. The effect of a 0.25% increase in interest rates would be a $12.0 million increase in interest expense.

 

10. For purposes of these pro forma statements, the U.S. Federal statutory tax rate of 35.0% has been used for all periods. This rate is an estimate and does not take into account future tax strategies that may be applied to the consolidated entity.

 

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11. The preliminary adjustments to historical weighted average basic and diluted shares for the pro forma periods presented are as follows (in millions):

 

     For the Year Ended
December 31, 2007
 
     Basic
shares
    Diluted
shares
 

Elimination of Trane shares

   (199.0 )   (199.0 )

Issuance of Ingersoll Rand shares

   44.8     44.8  

Effect of dilutive options

   —       (1.2 )
            
   (154.2 )   (155.4 )
            

 

12. The adjustment to the cash balances reflects the following:

 

   

the payment of $7,109.9 million in cash ($36.50 per outstanding share of Trane common stock and restricted stock units);

 

   

the payment of $148.4 million in cash in exchange for certain Trane stock options (approximately 5.8 million) calculated using the Cash-Out Amount described in this proxy statement/prospectus in the section entitled “The Merger Agreement—Treatment of Stock Options” beginning on page 69;

 

   

the issuance of $4,800.0 million in additional debt which will be used to partially fund (a) the cash portion of the purchase price and (b) an estimate of the out-of-pocket transaction costs of Ingersoll Rand associated with the merger; and

 

   

the payment of $50.0 million of estimated transaction costs and $10.0 million of debt issuance costs.

 

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DESCRIPTION OF INGERSOLL RAND’S CAPITAL STOCK

The following discussion is a summary of Ingersoll Rand’s share capital and should be read in conjunction with “Comparative Rights of Ingersoll Rand Shareholders and Trane Shareholders” beginning on page 109. This summary is not complete and is subject to the complete text of Ingersoll Rand’s memorandum of association and bye-laws. Ingersoll Rand is subject to the Companies Act 1981 of Bermuda, as amended (the “Companies Act”). Copies of Ingersoll Rand’s memorandum of association and bye-laws are filed as exhibits to the Ingersoll Rand reports incorporated by reference in this proxy statement/prospectus, see “Where You Can Find More Information” beginning on page 124. You are urged to read those documents carefully. Under Bermuda law, shareholders are referred to as members, although we refer to them as shareholders in this description for ease of reference.

Authorized Share Capital

The authorized share capital of Ingersoll Rand is US$1,175,010,000, consisting of (1) 1,175,000,000 common shares, par value $1.00 per share, which common shares consist of 600,000,000 Class A common shares and 575,000,000 Class B common shares, and (2) 10,000,000 preference shares, par value $0.001 per share, which preference shares consist of 600,000 Series A preference shares and such other series of preference shares as may be designated from time to time with the respective rights and restrictions determined by Ingersoll Rand’s board of directors. Only common shares (and associated preference share purchase rights) will be issued in the merger.

Voting

Each holder of Class A common shares will be entitled to one vote per common share held, subject to any required preference share class votes. Except as otherwise specifically provided in Ingersoll Rand’s bye-laws or in the Companies Act, any action to be taken by the shareholders at any general meeting at which a quorum is in attendance shall be decided by the affirmative vote of a majority of the votes cast at the general meeting. At its annual meeting to be held in June 2008, Ingersoll Rand’s shareholders will vote on a proposal to amend its bye-laws to implement majority voting in the election of director nominees.

Generally, the holders of Class B common shares will not be entitled to vote. However, under the Companies Act, each share of Ingersoll Rand carries the right to vote in respect of an amalgamation or merger, whether or not it otherwise carries the right to vote. Ingersoll Rand and Ingersoll-Rand Company, a New Jersey corporation and wholly-owned subsidiary of Ingersoll Rand (“Ingersoll Rand—New Jersey”) have entered into a voting agreement which provides that in those limited instances where Ingersoll Rand B common shares have the right to vote, Ingersoll Rand—New Jersey or any other Ingersoll Rand subsidiary holding Class B common shares shall vote (or abstain from voting) the shares in the same proportion as the holders of common shares. Therefore, Class B common shares will not dilute the voting power of common shares.

Subject to the interested shareholder provisions described below in “—Anti-Takeover Provisions,” shareholders holding a majority of the shares voting at a general meeting (including Class B common shares voting as a class with common shares), and each class or series of shares present and voting at a general meeting, and entitled to vote as a class or series, is required to approve a merger.

Changes to Rights of a Class or Series

Any rights attached to any class or series of shares of Ingersoll Rand, unless otherwise provided by the terms of that class or series, may be varied only with the consent in writing of the holders of 75% of that class or series or by a resolution passed at a separate general meeting of holders of the shares of that class or series. Each holder of shares of the class or series present will have one vote for each share of the class or series held to the extent such class or series has voting rights. Outstanding shares will not be deemed to be varied by the creation or issue of shares that rank in any respect prior to or equivalent with those shares.

 

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Quorum for General Meetings

Holders of shares representing a majority of the shares entitled to vote shall constitute a quorum at a general meeting of shareholders.

Dividend Rights

Subject to any rights and restrictions of any other class or series of shares, Ingersoll Rand’s board of directors may from time to time declare dividends and other distributions on the issued Class A common shares and Class B common shares and authorize payment of such dividends and other distributions. Such dividends or other distributions may be in cash, shares or property of Ingersoll Rand out of assets or funds legally available therefor.

If at any time a dividend or other distribution in cash, shares or other property is declared or paid on Class A common shares, a like dividend or other distribution in cash, shares or other property shall also be declared and paid on Class B common shares in an equal amount per share.

Rights Upon Liquidation

Upon the liquidation of Ingersoll Rand, after full amounts that holders of any other issued shares ranking senior to the common shares as to distribution on liquidation or winding up are entitled to receive have been paid or set aside for payment, the holders of Ingersoll Rand common shares are entitled to receive, pro rata, any remaining assets of Ingersoll Rand available for distribution to the holders of common shares. The liquidator may deduct from the amount payable in respect of those common shares any liabilities the holder has to or with Ingersoll Rand. The assets received by the holders of Ingersoll Rand common shares in a liquidation may consist in whole or in part of property. That property is not required to be of the same kind for all shareholders. For a general description of rights upon liquidation with respect to the Series A preference shares, please see “—Shareholder Rights Plan” below.

Pre-Emptive Rights

Subject to any series of preference shares granting such rights, holders of shares of Ingersoll Rand have no pre-emptive or preferential right to purchase any securities of Ingersoll Rand.

Redemption, Repurchase and Conversion

Class A common shares will not be convertible into shares of any other class or series or be subject to redemption either by Ingersoll Rand or the holders of common shares, provided, however, that subject to compliance with Bermuda law, Ingersoll Rand may repurchase shares for cancellation with the consent of the holder of such shares.

Class B common shares will be convertible by the holder thereof into Class A common shares on a one-for-one basis in the following circumstances:

 

   

to satisfy the obligations of Ingersoll Rand or any of its subsidiaries or affiliated companies to issue Class A common shares with regard to the issuance of shares under any stock or deferred compensation plans of Ingersoll Rand or any of its subsidiaries or affiliated companies; or

 

   

as consideration for any acquisition of stock or assets of a third party.

See “—Restrictions on Transfer” below.

In addition, and subject to the Companies Act, holders of Class B common shares will have the right at any time upon notice to Ingersoll Rand to require Ingersoll Rand to purchase for cancellation any or all of the Class B common shares for cash at the per share fair market value of the common shares as of the date of such notice.

 

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Restrictions On Transfer

Class A common shares are not subject to restrictions on transfer, other than as required to comply with applicable Bermuda law and U.S. and other securities laws.

It is Ingersoll Rand’s intention that Class B common shares only be held by Ingersoll Rand—New Jersey and other wholly-owned subsidiaries of Ingersoll Rand, and as such, would not be transferred out of the Ingersoll Rand consolidated group prior to being converted to Class A common shares as described above under “—Redemption, Repurchase and Conversion.” The Ingersoll Rand bye-laws provide that in the event Class B common shares are transferred to any person or entity other than a wholly-owned, direct or indirect, subsidiary of Ingersoll Rand, the shares so transferred will convert automatically into Class A common shares on a one-for-one basis. Any transfer of Class A common shares following conversion from Class B common shares will only be made in accordance with the applicable securities laws and rules of the NYSE, including those rules relating to required shareholder approvals.

Stock Exchange Listing

Class A common shares are listed on the NYSE under the symbol “IR.” Because Class B common shares are held only by Ingersoll Rand subsidiaries, they are not registered with the Securities and Exchange Commission or pursuant to any foreign securities laws and are not publicly traded.

Other Classes or Series of Shares

The Ingersoll Rand board of directors is authorized, without obtaining any vote or consent of the holders of any class or series of shares unless expressly provided by the terms of the issue of that class or series, to provide from time to time for the issuance of other classes or series of preference shares and to establish the characteristics of each class or series, including the number of shares, designations, relative voting rights, dividend rights, liquidation and other rights, redemption, repurchase or exchange rights and any other preferences and relative, participating, optional or other rights and limitations not inconsistent with applicable law. See “—Preference Shares” below and “Comparative Rights of Ingersoll Rand Shareholders and Trane Shareholders—Issuance of Preference Shares/Stock” for specific provisions with respect to preference shares.

Transfer Agent

The transfer agent and registrar for Class A common shares is The Bank of New York, Church Street Station, P.O. Box 11258, New York, New York 10286-1258, telephone number (800) 524-4458.

Anti-Takeover Provisions

The bye-laws and shareholder rights plan of Ingersoll Rand contain provisions that may be considered to have certain “anti-takeover” effects such as discouraging unsolicited takeover bids from third parties or making it more difficult to remove incumbent management. These provisions are intended to enhance the likelihood of continuity and stability in the composition of the board of directors and in the policies formulated by the board of directors and to discourage transactions that may involve an actual or threatened change of control of Ingersoll Rand that the board of directors does not believe is in the best interests of Ingersoll Rand.

Ingersoll Rand’s bye-laws provide that the board of directors will consist of not less than three nor more than twenty persons, with the exact number to be set from time to time by the board of directors. Accordingly, the board of directors, and not the shareholders, has the authority to determine the number of directors within the stated range and could delay any shareholder from obtaining majority representation on the board of directors by enlarging the board of directors and filling the new vacancies with its own nominees.

 

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Ingersoll Rand’s bye-laws provide that Ingersoll Rand may not engage in any “business combination” with any interested shareholder (generally, a 10% or greater shareholder) unless the business combination receives the

affirmative vote of the holders of 80% of the shares then in issue of all classes of shares entitled to vote considered for purposes of this provision as one class, provided that the above vote requirement does not apply to:

 

   

any business combination with an interested shareholder that has been approved by Ingersoll Rand’s board of directors; or

 

   

any agreement for the amalgamation, merger or consolidation of any subsidiary of Ingersoll Rand with Ingersoll Rand or with another subsidiary of Ingersoll Rand if (1) the relevant bye-law provisions will not be changed or otherwise affected by or by virtue of the amalgamation, merger or consolidation and (2) the holders of greater than 50% of the voting power of Ingersoll Rand or the subsidiary, as appropriate, immediately prior to the amalgamation, merger or consolidation continue to hold greater than 50% of the voting power of the amalgamated company immediately following the amalgamation, merger or consolidation.

The bye-laws of Ingersoll Rand provide that “business combination” means:

 

   

any amalgamation, merger or consolidation of Ingersoll Rand or one of its subsidiaries with an interested shareholder or with any person that is, or would be after such amalgamation, merger or consolidation, an affiliate or associate of an interested shareholder;

 

   

any transfer or other disposition to or with an interested shareholder or any affiliate or associate of an interested shareholder of all or any material part of the assets of Ingersoll Rand or one of its subsidiaries; and

 

   

any issuance or transfer of shares of Ingersoll Rand upon conversion of or in exchange for the securities or assets of any interested shareholder, or with any company that is, or would be after such merger or consolidation, an affiliate or associate of an interested shareholder.

Ingersoll Rand’s bye-laws provide that at any annual general meeting, only such business shall be conducted as shall have been brought before the meeting by or at the direction of Ingersoll Rand’s board of directors, by any shareholder who complies with certain procedures set forth in the bye-laws or by any shareholder pursuant to the valid exercise of the power granted under the Companies Act. For business to be properly brought before an annual general meeting by a shareholder, the shareholder must have given timely notice thereof in proper written form to the secretary of Ingersoll Rand and satisfied all requirements under applicable rules promulgated by the Securities and Exchange Commission and by the NYSE or any other exchange on which Ingersoll Rand’s securities are traded. To be timely for consideration at the annual general meeting, a shareholder’s notice must be received by the secretary at Ingersoll Rand’s principal executive offices not later than the date which is 90 days in advance of the anniversary of the immediately preceding annual general meeting or, if the date of the annual general meeting occurs more than 30 days before, or 60 days after, the anniversary of such immediately preceding annual general meeting, not later than the seventh day after the date on which notice of such annual general meeting is given. See “Comparative Rights of Ingersoll Rand Shareholders and Trane Shareholders—Shareholder Proposals and Nominations.”

Subject to the terms of any other class of shares in issue, any action required or permitted to be taken by the holders of Ingersoll Rand common shares must be taken at a duly called annual or special general meeting of shareholders unless taken by written consent of all holders of common shares required or permitted to take such action. Under the bye-laws, a special general meeting may be called by the chairman of Ingersoll Rand’s board of directors, the president, a majority of the board of directors, or upon the request of shareholders holding at least 10% of Ingersoll Rand’s shares as provided in the Companies Act. The bye-laws of Ingersoll Rand provide that any matter to be voted upon at a meeting called by shareholders requires the affirmative vote of at least 66 2/3% of the shares entitled to vote.

 

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Ingersoll Rand’s board of directors is authorized, without obtaining any vote or consent of the holders of any class or series of shares unless expressly provided by the terms of issue of a class or series, to issue from time to time any authorized and unissued preference shares on such terms and conditions as it may determine. For example, the board of directors could authorize the issuance of preference shares with terms and conditions that could discourage a takeover or other transaction that holders of some or a majority of the Class A common shares might believe to be in their best interests or in which holders might receive a premium for their shares over the then-current market price of the shares.

Ingersoll Rand has in place a shareholder rights plan. The operation of the Ingersoll Rand shareholder rights plan could result in the possible dilution of a potential acquiror’s interest in Ingersoll Rand. Consequently, the provisions of the Ingersoll Rand shareholder rights plan could discourage unsolicited takeover bids for Ingersoll Rand from third parties. See “—Shareholder Rights Plan” below.

Compulsory Acquisition of Shares Held by Minority Holders

An acquiring party is generally able to compulsorily acquire the common shares of minority shareholders in one of the following ways:

 

   

By a procedure under the Companies Act known as a “scheme of arrangement.” A scheme of arrangement could be effected by obtaining the agreement of the company and of holders of common shares, representing in the aggregate a majority in number and at least 75% in value of the common shareholders present and voting at a court ordered meeting held to consider the scheme or arrangement. The scheme of arrangement must then be sanctioned by the Bermuda Supreme Court. If a scheme of arrangement receives all necessary agreements and sanctions, upon the filing of the court order with the Registrar of Companies in Bermuda, all holders of common shares could be compelled to sell their shares under the terms of the scheme or arrangement.

 

   

If the acquiring party is a company, by acquiring pursuant to a tender offer, 90% of the shares or class of shares not already owned by the acquiring party (the “offeror”). If an offeror has, within four months after the making of an offer for all the shares or class of shares not owned by the offeror, obtained the approval of the holders of 90% or more of all the shares to which the offer relates, the offeror may, at any time within two months beginning with the date on which such approval was obtained, require by a “notice of acquisition” any nontendering shareholder to transfer its shares on the same terms as the original offer. In those circumstances, nontendering shareholders will be compelled to sell their shares unless the Supreme Court of Bermuda (on application made within a one-month period from the date of the notice of acquisition) orders otherwise.

 

   

Where one or more parties holds not less than 95% of the shares or a class of shares of Ingersoll Rand, such holder may, pursuant to a notice given to the remaining shareholders or class of shareholders, acquire the shares of such remaining shareholders or class of shareholders. When such a notice is given, the acquiring party is entitled and bound to acquire the shares of the remaining shareholders on the terms set out in such notice, unless a remaining shareholder applies to the Supreme Court of Bermuda for an appraisal of the value of its shares. This provision only applies where the acquiring party offers the same terms to all holders of shares whose shares are being acquired.

Preference Shares

Ingersoll Rand’s board of directors may from time to time authorize the issuance of preference shares in one or more series of preference shares, and in the resolution or resolutions providing for the issuance of such shares, the board of directors is expressly authorized to fix for each such series the number of shares which shall constitute such series, voting power, full or limited, or no voting power, and designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof. Such a “blank check” preference share provision could have certain “anti-takeover” effects. See “—Anti-Takeover Provisions” above.

 

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The Ingersoll Rand board of directors in authorizing such series may provide, among others, that any such series may be (in each case, as set forth in the resolutions authorizing the series of preference shares):

 

   

subject to redemption at the option of Ingersoll Rand or the holders, or both, at such time or times and at such price or prices;

 

   

entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or any other series;

 

   

entitled to such rights upon the liquidation, dissolution or winding up of Ingersoll Rand;

 

   

convertible into, or exchangeable for, shares of any other class or classes of shares, or of any other series of the same or any other class or classes of shares, of Ingersoll Rand at such price or prices or at such rates of exchange and with such adjustments; and

 

   

subject to the preferences, rights and qualifications of any other series.

Shareholder Rights Plan

Issuance of Rights

The Ingersoll Rand shareholder rights plan provides for the issuance of half of one right (a “right") to purchase one one-thousandth of an Ingersoll Rand Series A preference share for each common share in issue as of the effective time of the merger (the “record date”).

Evidence of Rights

Under the shareholder rights plan, until the earlier to occur of (i) 10 days following a public announcement that a person or group of affiliated or associated persons (an “acquiring person") has acquired beneficial ownership of 15% or more of the shares in issue of Class A common shares or (ii) 10 business days (or such later date as may be determined by action of the board of directors of Ingersoll Rand prior to such time as any person or group of affiliated persons becomes an acquiring person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 15% or more of the shares in issue of Class A common shares (the earlier of such dates being called the “distribution date”), the rights will be evidenced, with respect to any of the Class A common share certificates in issue as of the record date, by such Class A common share certificates together with a summary of the rights. The shareholder rights plan provides that, until the distribution date (or earlier redemption or expiration of the rights), the rights will be transferred with and only with common shares. Until the distribution date (or earlier redemption or expiration of the rights), new Class A common share certificates issued after the record date upon transfer or new issuances of Class A common shares will contain a notation incorporating the Ingersoll Rand shareholder rights plan by reference. Until the distribution date (or earlier redemption or expiration of the rights), the surrender for transfer of any certificates for Class A common shares in issue as of the record date, even without such notation or a copy of the summary of rights, will also constitute the transfer of the rights associated with Class A common shares represented by such certificate. As soon as practicable following the distribution date, separate certificates evidencing the rights will be mailed to holders of record of Class A common shares as of the close of business on the distribution date and such separate certificates alone will evidence the rights.

Duration of Rights

The rights are not exercisable until the distribution date. The rights will expire on December 22, 2008, unless this date is extended or unless the rights are earlier redeemed or exchanged by Ingersoll Rand, in each case as described below.

 

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Adjustments

The purchase price payable, and the number of Series A preference shares or other securities or property issuable, upon exercise of the rights are subject to adjustment from time to time to prevent dilution (i) in the event of a share dividend on, or a subdivision, combination or reclassification of, the Series A preference shares, (ii) upon the grant to holders of the Series A preference shares of certain rights or warrants to subscribe for or purchase Series A preference shares at a price, or securities convertible into Series A preference shares, with a conversion price less than the then-current market price of the Series A preference shares or (iii) upon the distribution to holders of the Series A preference shares of evidences of indebtedness or assets (excluding regular periodic cash dividends or dividends payable in Series A preference shares) or of subscription rights or warrants (other than those referred to above). The number of rights in issue is also subject to adjustment in the event of a share division of Class A common shares or a share dividend on Class A common shares payable in Class A common shares or subdivisions, consolidations or combinations of Class A common shares occurring, in any such case, prior to the distribution date.

Series A Preference Shares

Series A preference shares purchasable upon exercise of the rights will not be redeemable. Each Series A preference share will be entitled, when, as and if declared, to a minimum preferential quarterly dividend payment of $1.00 per share but will be entitled to an aggregate dividend of 1,000 times the dividend declared per Class A common share. In the event of liquidation, the holders of the Series A preference shares will be entitled to a minimum preferential liquidation payment of $100 per share (plus any accrued but unpaid dividends) and will be entitled to an aggregate payment of 1000 times the payment made per Class A common share. Each Series A preference share will have 1000 votes, voting together with Class A common shares. Finally, in the event of any amalgamation, merger, consolidation or other transaction in which Class A common shares are converted or exchanged, each Series A preference share will be entitled to receive 1000 times the amount received per Class A common share. These rights are protected by customary antidilution provisions.

Because of the nature of the Series A preference shares’ dividend, liquidation and voting rights, the value of the one one-thousandth interest in a Series A preference share purchasable upon exercise of each half of a right should approximate the value of one Class A common share.

Exercise of Rights

In the event that any person or group of affiliated or associated persons becomes an acquiring person, each holder of a right, other than rights beneficially owned by the acquiring person (which will thereupon become void), will thereafter have the right to receive upon exercise of a right at the then-current exercise price of the right, that number of Class A common shares having a market value of two times the exercise price of the right.

In the event that, after a person or group has become an acquiring person, Ingersoll Rand is acquired in an amalgamation, merger or other business combination transaction or 50% or more of its consolidated assets or earning power are sold, proper provision will be made so that each holder of a right (other than rights beneficially owned by an acquiring person which will have become void) will thereafter have the right to receive, upon the exercise thereof at the then-current exercise price of the right, that number of common shares of the person with whom Ingersoll Rand has engaged in the foregoing transaction (or its parent), which number of shares at the time of such transaction will have a market value of two times the exercise price of the right.

Exchange of Rights

At any time after any person or group becomes an acquiring person and prior to the acquisition by such person or group of 50% or more of the Class A common shares in issue or the occurrence of an event described in the prior paragraph, the board of directors of Ingersoll Rand may exchange the rights (other than rights owned

 

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by such person or group which will have become void), in whole or in part, at an exchange ratio of one Class A common share, or one one-thousandth of a Series A preference share (or of a share of a class or series of Ingersoll Rand’s preference shares having equivalent rights, preferences and privileges), per half right (subject to adjustment).

No Fractional Shares

With certain exceptions, no adjustment in the purchase price will be required until cumulative adjustments require an adjustment of at least 1% in such purchase price. No fractional Series A preference shares will be issued (other than fractions which are integral multiples of one one-thousandth of a Series A preference share, which may, at the election of Ingersoll Rand, be evidenced by depositary receipts) and in lieu thereof, an adjustment in cash will be made based on the market price of the Series A preference shares on the last trading day prior to the date of exercise.

Redemption

At any time prior to the time an acquiring person becomes such, the board of directors of Ingersoll Rand may redeem the rights in whole, but not in part, at a price of $.01 per right (the “redemption price”). The redemption of the rights may be made effective at such time, on such basis and with such conditions as the board of directors in its sole discretion may establish. Immediately upon any redemption of the rights, the right to exercise the rights will terminate and the only right of the holders of rights will be to receive the redemption price.

Amendment of Rights

The terms of the rights may be amended by the board of directors of Ingersoll Rand without the consent of the holders of the rights, including an amendment to lower the 15% threshold for an acquiring person described above to not less than the greater of (i) the sum of .001% and the largest percentage of the Class A common shares in issue then known to Ingersoll Rand to be beneficially owned by any person or group of affiliated or associated persons and (ii) 10%, except that from and after such time as any person or group of affiliated or associated persons becomes an acquiring person no such amendment may adversely affect the interests of the holders of the rights.

No Rights as a Shareholder

Until a right is exercised, the holder thereof, as such, will have no rights as a shareholder of Ingersoll Rand including, without limitation, the right to vote or to receive dividends.

Certain Anti-Takeover Effects

The rights have certain anti-takeover effects. The rights will cause substantial dilution to a person or group that attempts to acquire Ingersoll Rand on terms not approved by the board of directors of Ingersoll Rand, except pursuant to an offer conditioned on a substantial number of rights being acquired. The rights should not interfere with any amalgamation, merger or other business combination approved by the board of directors since the rights may be redeemed by Ingersoll Rand at the redemption price prior to the time that a person or group has acquired beneficial ownership of 15% or more of the Class A common shares. See “Comparative Rights of Ingersoll Rand Shareholders and Trane Shareholders—Shareholder Rights Plan.”

 

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COMPARATIVE RIGHTS OF INGERSOLL RAND SHAREHOLDERS AND

TRANE SHAREHOLDERS

The rights of Ingersoll Rand shareholders are currently governed by the Companies Act and the memorandum of association and bye-laws of Ingersoll Rand. The rights of Trane shareholders are currently governed by the General Corporation Law of the State of Delaware (the “DGCL”) and the restated certificate of incorporation and amended bylaws of Trane, which we refer to as the certificate of incorporation and bylaws of Trane.

This section of the proxy statement/prospectus describes the material differences between the rights of Ingersoll Rand shareholders and Trane shareholders.

This section does not include a complete description of all differences among the rights of Ingersoll Rand shareholders and Trane shareholders, nor does it include a complete description of the specific rights of these shareholders. Furthermore, the identification of some of the differences in the rights of these shareholders as material is not intended to indicate that other differences that may be equally important do not exist.

You are urged to read carefully the relevant provisions of the Companies Act and the DGCL, as well as the memorandum of association and bye-laws of Ingersoll Rand and the certificate of incorporation and bylaws of Trane. Copies of the memorandum of association and bye-laws of Ingersoll Rand and the certificate of incorporation and bylaws of Trane are filed as exhibits to the reports of Ingersoll Rand and Trane incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 124.

 

Capitalization

 
Ingersoll Rand   Trane
The authorized capital stock of Ingersoll Rand currently consists 1,175,000,000 common shares, consisting of 600,000,000 Class A common shares and 575,000,000 Class B common shares, par value $1.00 per share, and 10,000,000 preference shares, par value $0.001 per share, 600,000 of which have been designated as Series A Preference Shares.  

The authorized capital stock of Trane currently consists of 560,000,000 shares of common stock, par value $.01 per share, and 2,000,000 shares of preferred stock, par value $.01 per share.

 

900,000 shares of Trane’s Preferred Stock have been designated as Junior Participating Cumulative Preferred Stock.

 

Issuance of Preference Shares/Stock

 
Ingersoll Rand   Trane
The bye-laws provide that the board of directors of Ingersoll Rand may from time to time authorize by means of a board resolution the issuance of preference shares in one or more series of preference shares, and in the resolution or resolutions providing for the issue of such shares, the board of directors is expressly authorized to fix for each such series the number of shares which shall constitute such series, voting power, full or limited, or no voting power, and designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof. Such a “blank check” preference share provision could have certain “anti-takeover” effects. See “Description of Ingersoll Rand’s Capital Stock—Anti-Takeover Provisions.”   The certificate of incorporation provides that the board of directors of Trane is authorized from time to time to provide for the issuance of shares of preferred stock in series, to establish the number of shares to be included in such series, and to fix the designation, powers, preferences and rights of shares of each series and the qualifications, limitations and restrictions of those series, including: whether dividends, if any, shall be cumulative or noncumulative and the dividend rate of the series; the redemption rights and price, if any, for the series; the terms and amount of any sinking fund provided for the purchase or redemption of shares of the series; the amounts payable on shares of the series in the event of any liquidation, dissolution or winding up; whether and on what terms the shares of the series

 

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  shall be convertible or exchangeable into any other security; restrictions on the issuance of shares of the series or of any other class or series; and the voting right