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Ingersoll Rand Refinances $1.2 Billion Debt, Eyes Growth Through Acquisitions

Ingersoll Rand to refinance $1.2 billion in debt, aiming for unsecured status post-ILC Dover acquisition to fuel life-sciences expansion.

By Max Weldon

4/3, 12:44 EDT
Ingersoll Rand Inc.
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Key Takeaway

  • Ingersoll Rand is refinancing $1.2 billion in debt, moving from secured to unsecured, following a credit-rating boost and the acquisition of ILC Dover for $2.33 billion.
  • The company's strategic shift includes launching a life-sciences platform, aiming for growth through acquisitions, with over 40 companies acquired post-merger.
  • Reported a 16% revenue increase to $6.88 billion and a 28.8% net income growth to $778.7 million in 2023, focusing on industrial technologies demand and expansion strategy.

Debt Refinancing Strategy

Ingersoll Rand, an industrial-machinery company based in Davidson, N.C., is in the process of refinancing $1.2 billion in debt. This move is part of its strategy to convert all of its debt from secured to unsecured, according to Chief Financial Officer Vikram Kini. The refinancing is linked to the company's acquisition of ILC Dover, a flexible-materials maker, expected to close this quarter. Joyce Frost, a partner at Riverside Risk Advisors, explained that achieving an investment-grade rating could lower the cost of new, unsecured debt compared to secured debt, due to access to a larger pool of lenders.

Strategic Overhaul and Expansion

Ingersoll Rand has undergone significant changes in recent years, focusing on expansion through acquisitions. The company has acquired over 40 companies since its merger, aiming to enhance its growth profile. Recently, Ingersoll Rand announced its largest deal in years, agreeing to buy ILC Dover for $2.33 billion, a move aimed at expanding into the life-sciences sector. Following a Moody’s rating, the company converted $1.5 billion of its $2.7 billion total debt from secured to unsecured, anticipating better rate profiles for future refinancing.

Launch of Life-Sciences Platform

The acquisition of ILC Dover is part of Ingersoll Rand's plan to launch a life-sciences platform, with approximately $700 million in revenue allocated for investment in this area. This platform will include ILC Dover among other brands, providing a new avenue for strategic bolt-on mergers and acquisitions (M&A). CFO Vikram Kini highlighted this move as a strategic opportunity to further the company's presence in the growing life-sciences sector.

Financial Performance and Future Outlook

Ingersoll Rand reported a 16% increase in revenue for 2023, totaling $6.88 billion, with net income growing by 28.8% to $778.7 million compared to the previous year. The company attributes this growth to higher demand in its industrial technologies business. Kini emphasized the importance of delivering on commitments and executing on the company's economic growth engine as key factors that will hopefully resonate with rating agencies. Continuous acquisitions remain a central part of Ingersoll Rand's long-term strategy, aiming to enhance revenue and expand margins.

Management Quotes

  • Vikram Kini, CFO of Ingersoll Rand:

    "We would expect to get a better rate profile as we move forward and continue to refinance our debt portfolio comparatively speaking to what we had historically." "It now gives us another beachhead to be able to do strategic bolt-on M&A." "The best foot forward here is continuing to deliver on our commitments, execute on our economic growth engine and quite frankly continuing to show ongoing growth both from the top line, margin and free cash flow perspectives. I think those are the things that hopefully will resonate with the rating agencies as they continue to look at the company."

Street Views

  • Joyce Frost, Riverside Risk Advisors (Neutral on Ingersoll Rand):

    "A company that achieves an investment-grade rating often benefits from a lower interest cost for new, unsecured debt than the secured debt it already holds on its balance sheet... That is because the company can gain greater access to a large pool of lenders to investment-grade companies that are willing to lend at lower spreads compared with that of non-investment-grade businesses, even if those loans were secured."