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Bath and Kitchen Pro

Who Will Buy American Standard's Bath & Kitchen Division

By Steve Smith
March 6, 2007

At the time of this writing speculation continued on who would buy the $2.4 billion (2006 sales) bath-and-kitchen business of American Standard. Candidates ranged from the Chinese to Home Depot to American, European and Asian plumbing manufacturers as well as to investment bankers.

“I do think it will be a valuable property,” said Fred Poses, chairman and CEO, in a conference call with stock analysts to announce the breakup and deliver fourth-quarter results. He added that he’s already received interest, but would not name names.

Executives announced in February that the $11 billion toilets-to-brakes conglomerate dating back to the 19th century would sell its well-known bath-and-kitchen division, spin off its vehicle control division and rename itself Trane after the flagship brand name of the one business it will keep.

Analysts said the sale price of the ailing plumbing business may be less than Poses wants to think. A.G. Edwards analyst Christopher Kotowicz told the Reuters news agency a day after the announcement that American Standard “would be lucky to take in gross proceeds of $1.5 billion” for the business because of “lackluster profitability.” Deutsche Bank’s Nigel Coe gave the business a $1.2 billion price tag. Keith Humphrey, SunTrust Robinson Humphrey, wouldn’t give an estimate, but said it would be “well below” its 2006 sales.

“Some people have a view that this is the wrong time to sell because the housing market is not strong,” countered Poses. “But people see through that and pay for the long-term value of the business.”

The company will use money from the plumbing business to pay down debt and buy back what will be Trane stock. The breakup does not require shareholder approval and is expected to be completed by September.

Current executives of the three units are expected to stay on in their respective roles except for Poses, who will remain chairman and CEO until the end of the year, when he expects to retire. A search is already underway to name his successor.

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Steve Smith is Editor of Plumbing & Mechanical. He can be reached at 630/694-4339 or smiths@bnpmedia.com

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