NEW YORK (Reuters) - Industrial conglomerate Ingersoll-Rand (IR.N) put its Hussmann refrigeration business on the block and is being advised by JPMorgan Chase & Co (JPM.N) on the process, people familiar with the matter said.
The Hussmann unit, which provides supermarkets and food retailers with display cases, refrigeration systems and beverage coolers, would likely fetch under $1 billion, two of those sources said.
The refrigeration display business is considered highly cyclical and exposed to rising raw material costs. Grocery stores and other food retailers held back on new investment during the recent economic downturn, weighing on margins for Hussmann and its rivals.
Several parties are interested, including private equity firm Warburg Pincus LLC, and the auction has advanced to the second round, one of the sources and a third source familiar with the matter said.
Interest in the business has been driven mostly by private equity, one source said.
The people asked not to be identified because the auction is not public. Representatives for Ingersoll-Rand, JPMorgan and Warburg Pincus declined to comment.
The potential sale of Hussmann would be Ingersoll-Rand’s second asset sale in less than a year in that area, which was hurt in recent years by slow capital spending by supermarkets and high raw material costs.
The company sold its KOXKA European refrigerated display business in late 2010 to a unit of American Industrial Acquisition Corporation.
Hussmann, founded in 1906 by Harry Hussmann, was sold to Ingersoll-Rand in 2000 for $1.55 billion in cash.
Ingersoll does not break out Hussmann revenues, but the conglomerate’s refrigeration equipment business, which also includes Thermo King transport equipment, recorded 2010 sales of $1.9 billion.
BernsteinResearch analyst Steven Winoker wrote in a March 4 note that Hussmann’s days in Ingersoll-Rand’s portfolio appeared to be numbered, saying that the conglomerate would need to make significantly new investment to improve Hussmann’s margins.
“It would appear ... that management believes they can turn around Hussmann but it is a question at what cost/investment to do so,” Winoker said.
“We do think management can make it work but would not be bothered by finding a better home for it and redeploying the capital elsewhere in the portfolio,” Winoker said.
Shares of Ingersoll-Rand were up about 0.3 percent at $46.06 on the New York Stock Exchange.
DealReporter previously reported news of the auction.
Reporting by Soyoung Kim and Megan Davies, additional reporting by Nick Zieminski; Editing by Derek Caney