December 10, 2012 / 3:35 AM / 5 years ago

UPDATE 2-Ingersoll-Rand to spin off security business -sources

* Company also plans share buyback, dividend hikes -sources

* Follows strategic review after pressure from Nelson Peltz

* Activist investor Peltz joined Ingersoll board in August

* Security division had 2011 operating income of $330 mln

* Other conglomerates have also broken up, made divestitures

By Soyoung Kim and Michael Erman

NEW YORK, Dec 9 (Reuters) - Ingersoll-Rand Plc is expected to announce as soon as Monday it will spin off its security division, two people familiar with the matter said, as the industrial conglomerate cedes to pressure from activist investor Nelson Peltz to unlock more shareholder value.

The company, which has a market value of more than $14.5 billion, also plans to buy back shares and increase dividends, one of the sources said.

The spin-off, buybacks and dividend hikes come as part of a strategic review undertaken by Ingersoll after Peltz’s Trian Fund Management LP acquired a stake of about 7 percent and proposed a break-up of the company. Peltz joined the company’s board in August after three months of agitating for changes at the manufacturer.

Ingersoll’s security technology division -- which makes mechanical and electronic locks as well as steel doors -- had operating income of more than $330 million in 2011 on revenue of $1.63 billion.

The sources, who declined to be identified as the matter is not public, did not put a value on the division. Ingersoll and Peltz declined to comment.

Peltz has, among other proposals, suggested separating Ingersoll’s main business units into three standalone publicly traded companies focused on air conditioning and heating, security, and the remainder of its industrials businesses.

Some analysts agreed, saying that Ingersoll’s shares were undervalued because of its disparate businesses. Several other diversified conglomerates have also decided to break up, often under pressure from activist investors.

Activist investor Ralph Whitworth pressured industrial conglomerate ITT Corp to split up its defense and water purifying businesses. Other companies announcing breakups or major divestitures include Tyco International Ltd, Kraft Foods Inc and Fortune Brands.

Ingersoll’s biggest business is heating and cooling systems as a result of its 2008 purchase of Trane. It also makes industrial air compressors and golf carts.

Its competitors in heating and cooling include Johnson Controls’ York business, United Technologies Corp’s Carrier unit and Lennox International Inc.

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