DE Shaw: New purchases in 4Q 2013

Part 2
DE Shaw: New purchases in 4Q 2013 (Part 2 of 5)

Why did DE Shaw initiate a position in Allegion?

DE Shaw initiated a 0.13% position in Allegion (ALLE), a $2 billion security solutions provider for homes and businesses, in 4Q 2013.

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Allegion debuted in December last year as a standalone, publicly-traded company following its spinoff from industrial goods manufacturer Ingersoll Rand (IR). Under the spinoff transaction, approximately 96 million ordinary shares of Allegion were issued to Ingersoll Rand shareholders. These holders received one ordinary share of Allegion for every three ordinary shares of IR held. Fractional shares that the IR shareholders would otherwise have been entitled to receive were aggregated and sold in the public market.

Ireland-based Ingersoll-Rand, whose main business is heating and cooling systems, had confirmed the spin off in December 2012 post a strategic review to improve shareholder and company value. Activist firm Trian Partners, which acquired a 7% stake in Ingersoll-Rand in 2012 and a seat on the company’s board, was instrumental in pushing for a break up of the company that eventually culminated in the spin off of the security business. The division, according to news reports, accounts for 15% of Ingersoll-Rand’s revenue. After the spin off, Ingersoll reported its financial results as two segments—climate and industrial. For the fourth quarter, Ingersoll-Rand reported a profit of $47.6 million, or $0.16 a share, a decline from $235.6 million, or $0.78 a share due to a slowdown in U.S. construction spending. The company said on its earnings call that industrial markets will remain slow, and that industrial production statistics have not improved in recent reports.

ALLE1Enlarge GraphAllegion recently declared a quarterly dividend of $0.08 per ordinary share and authorized the repurchase of up to $200 million of shares. The company specializes in security around the doorway and beyond: everything from residential and commercial locks, door closers and exit devices, steel doors and frames, to access control and workforce productivity systems. Allegion comprises 23 global brands, including strategic brands CISA, Interflex, LCN, Schlage, and Von Duprin. Ingersoll-Rand’s industrial brands include Club Car golf carts, Schlage security locks, Thermo King temperature-control equipment, and Trane air conditioning systems and services.

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