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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
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IMO INDUSTRIES INC.
(Name of Issuer)
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II ACQUISITION CORP.
IMO MERGER CORP.
STEVEN M. RALES
MITCHELL P. RALES
(Name of Persons Filing Statement)
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COMMON STOCK, $1.00 PAR VALUE PER SHARE, AND ASSOCIATED RIGHTS TO
PURCHASE SERIES B JUNIOR PARTICIPATING PREFERRED STOCK $1.00 PAR VALUE
PER SHARE
(Title of Class of Securities)
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452540107
(CUSIP Number of Class of Securities)

JOHN A. YOUNG
II ACQUISITION CORP.
9211 FOREST HILL AVENUE
SUITE 109
RICHMOND, VA 23235

(Name, Address and Telephone Number of Person Authorized to Receive Notice and
Communications on Behalf of Persons Filing Statement)

WITH COPIES TO:

MEREDITH M. BROWN, ESQ.
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NY 10022
(212) 909-6000

THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

This statement is filed in connection with (check the appropriate box):

a. / / The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b. / / The filing of a registration statement under the Securities Act of
1933.
c. / / A tender offer
d. /X/ None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: / /

CALCULATION OF FILING FEE

=========================================================================================================
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
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$8,614,310.40 $1,722.86
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* Calculated, for purposes of determining the filing fee only, and in
accordance with Rule 0-11(b)(2) under the Securities Exchange Act of 1934,
as amended, by multiplying 1,221,888 (the number of shares of Common Stock
held by stockholders other than II Acquisition Corp. or Imo Merger Corp.)
by $7.05, the price to be paid per share.

** Calculated as 1/50 of 1% of the transaction value.

/ / Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

Amount Previously Paid: N/A Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
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INTRODUCTION

This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3")
is being filed by (i) II Acquisition Corp., a Delaware corporation ("IIAC"),
(ii) Imo Merger Corp., a Delaware corporation and wholly-owned subsidiary of
IIAC ("Merger Sub"), (iii) Steven M. Rales, an individual, and (iv) Mitchell P.
Rales, an individual and together with Steven M. Rales, the controlling
stockholders of IIAC, pursuant to Section 13(e) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and Rule 13e-3 thereunder, in
connection with a "short-form" merger (the "Merger") of Merger Sub with and into
Imo Industries Inc., a Delaware corporation (the "Company"), pursuant to Section
253 of the Delaware General Corporation Law ("DGCL"). The effective date of the
merger will be July 2, 1998.

The Merger is intended to be the second step in the acquisition by IIAC of the
entire equity interest in the Company. In August 1997, IIAC acquired 92.8% of
the Company's common stock, $1.00 par value per share (the "Shares"), through a
tender offer (the "Tender Offer") at a price of $7.05 per Share, in a
transaction that was unanimously approved by the directors of the Company, none
of whom were affiliated with IIAC. In the Merger, IIAC will acquire the
remaining equity interest in the Company at a price of $7.05 per Share.

On June 1, 1998, IIAC contributed to Merger Sub 100% of IIAC's holdings of the
Shares. Under the DGCL, no action is required by the stockholders of the
Company, other than Merger Sub (through its Board of Directors), for the Merger
to become effective. The Company will be the surviving corporation in the Merger
and, as a result of the Merger, will become a wholly-owned subsidiary of IIAC.
Upon the consummation of the Merger, each of the remaining outstanding Shares
(other than Shares held by Merger Sub, the Company and holders who properly
exercise dissenters' rights under Delaware law) will be automatically converted
into the right to receive $7.05 in cash, without interest, upon surrender of the
certificate for such Share to First Chicago Trust Company of New York, as Paying
Agent. Both the redemption procedure and the statutory appraisal rights are
described in fuller detail in the Notice of Merger and Appraisal Rights and the
accompanying Letter of Transmittal, which documents accompany this Schedule
13E-3 and should be studied with care.

SPECIAL FACTORS

THE INFORMATION CONTAINED IN ITEMS 7, 8 AND 9 HEREOF CONSTITUTE
SPECIAL FACTORS, AND SPECIAL CONSIDERATION SHOULD BE GIVEN THERETO.

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ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION

(a) The name of the issuer is Imo Industries Inc., a Delaware corporation
(the "Company"). The address of the principal executive offices of
the Company is 1009 Lenox Drive, Building Four West, Lawrenceville,
New Jersey 08648-0550.

(b) The class of equity securities which is the subject of the Rule 13e-3
transaction is the Common Stock, par value $1.00 per share, of the
Company (the "Shares"), including the associated rights to purchase
shares of the Company's Series B Junior Participating Preferred
Stock, par value $1.00 per share (the "Rights"), issued pursuant to
the Rights Agreement, dated as of April 30, 1997 (as amended from
time to time, the "Rights Agreement"), between the Company and First
Chicago Trust Company of New York, as Rights Agent. An aggregate of
17,127,859 Shares were outstanding as of May 29, 1998. The Company
had 12,756 holders of record of the Shares as of May 28, 1998.

(c) The Shares are listed and principally traded on the New York Stock
Exchange. The following table sets forth for the fiscal quarters
indicated, the high and low sale prices per share on the New York
Stock Exchange, as reported by Bloomberg L.P., since January 1, 1996.
On May 29, 1998, the closing price per Share as reported on the New
York Stock Exchange was $6.75. STOCKHOLDERS ARE URGED TO OBTAIN A
CURRENT MARKET QUOTATION FOR THE SHARES.

Period Covered High Low
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Fiscal 1996

First Quarter $7 5/8 $5 3/4

Second Quarter 8 1/8 5 1/4

Third Quarter 5 7/8 4 7/8

Fourth Quarter 5 5/8 2 3/4

Fiscal 1997

First Quarter 3 7/8 2 7/8

Second Quarter 5 7/8 2 1/4

Third Quarter 7 5 3/4

Fourth Quarter 6 3/8 4 1/2

Fiscal 1998

First Quarter 6 7/8 4 1/2

Second Quarter (through 7 1/4 6 1/2
May 29, 1998)

(d) The Company did not declare or pay any dividends during 1996, 1997,
the first quarter of 1998, or the second quarter of 1998 (through
June 1st). The Company's long-term debt agreements contain, among
other provisions, restrictions on retained earnings available for
payment of dividends. Under the most restrictive provisions, the
Company is prohibited from declaring or paying cash dividends through
at least August 29, 2002. Furthermore, one of the long-term debt
agreements contains restrictions on the declaration and payments of
dividends based on certain financial ratios through May 1, 2006.

(e) Neither the Company nor any affiliate filing this schedule had made
an underwritten public offering of the Shares for cash during the
past 3 years which was registered under Securities Act of 1933 or
exempt from registration thereunder pursuant to Regulation A.

(f) Neither the Company nor any affiliate of the Company has purchased
any Shares since the closing of IIAC's tender offer (the "Tender
Offer") for all of the Shares, at $7.05 per Share, in August 1997.

ITEM 2. IDENTITY AND BACKGROUND

(a) - (d)
and (g) This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the
"Schedule 13E-3") is being filed jointly by (i) II Acquisition
Corp., a Delaware corporation ("IIAC"), (ii) Imo Merger Corp., a
Delaware corporation and wholly-owned subsidiary of IIAC ("Merger
Sub"), (iii) Steven M. Rales, an individual, and (iv) Mitchell P.
Rales, an individual.

IIAC, a Delaware corporation, is a holding company that prior to June
1, 1998 owned 92.8% of the Shares of the Company. On June 1, 1998,
IIAC contributed all of the Shares that it owned to Merger Sub. IIAC
currently owns all of the outstanding equity of Merger Sub. Merger
Sub is a newly incorporated Delaware corporation organized to effect
the Merger and has not engaged in any other activities since its
formation. The principal executive offices of IIAC and Merger Sub are
each located at 9211 Forest Hill Road, Suite 109, Richmond, Virginia
23235. Steven M. Rales and Mitchell P. Rales are brothers and
controlling

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stockholders of IIAC. The following table sets forth the name,
present principal employment, and five-year employment history of the
directors, executive officers and controlling persons of each of IIAC
and Merger Sub. Each individual in the following table is a United
States citizen.

Name Principal Occupation or Employment Five-Year Employment History
---- ---------------------------------- ----------------------------

Steven M. Rales Chairman of the Board of Directors Mr. Rales is Chairman of the Board of Danaher Corporation,
of Danaher Corporation a manufacturer of tools and process/environmental controls
products, and has held that position since 1984. Mr. Rales
is a director of IIAC, Merger Sub and the Company, and has
held those directorships since 1997, 1998 and 1997,
respectively. Mr. Rales was a General Partner of Equity
Group Holdings, a general partnership located in
Washington, D.C., with interests in manufacturing
companies, media operations, and publicly traded
securities, from 1979 until its dissolution in 1997. Mr.
Rales is also a director of Colfax Capital Corp., Janelia
Farm Corp. and American Enterprises MPT Corp. and has held
those directorships from 1997, 1988 and 1996, respectively.
Mr. Rales is also a Member of the Board of Managers of
Constellation Capital Partners LLC, a private equity firm.
Mr. Rales is also a founder and has been Chairman of Colfax
Communications, Inc. since 1991. He is also a founder of
Wabash National Corporation and was its Chairman of the
Board of Directors until 1994.

Mitchell P. Rales Chairman of the Executive Committee Mr. Rales has been a director of Danaher Corporation since
of the Board of Directors of 1984 and has been Chairman of its Executive Committee since
Danaher Corporation 1990. He is a director of IIAC, Merger Sub and the
Company, and has held those directorships since 1997, 1998
and 1997, respectively. Mr. Rales was a General Partner
of Equity Group Holdings from 1979 to 1997. Mr. Rales is
also a director of Colfax Capital Corp., Janelia Farm Corp.
and American Enterprises MPT Corp. and has held those
directorships from 1997, 1988 and 1996, respectively. Mr.
Rales is also a Member of the Board of Managers of
Constellation Capital Partners LLC. Mr. Rales is also a
founder and has been a director of Colfax Communications,
Inc., since 1991. He is also a founder of Wabash National
Corporation and was a director until 1994.

Philip W. Knisely Chairman, Chief Executive Officer Mr. Knisely became a director, Chief Executive Officer and
and President of the Company President of the Company in August 1997. He was named
Chairman of the Board in November 1997. Mr. Knisely has
been the President and Chief Executive Officer of IIAC
and Merger Sub since 1997 and 1998, respectively. Since
1995, Mr. Knisely has been on the Board of Managers and
has been President of Constellation Capital Partners LLC.
He has also been director and President of American
Enterprises MPT Corp. since 1996. From 1988 to 1995, he
was President of AMF Industries, a privately held
diversified manufacturing company at 8100 AMF Drive,
Mechanicsville, VA 23111.

John A. Young Vice President, Treasurer, Chief Mr. Young joined the Company as Vice President and
Financial Officer, and Assistant Assistant Secretary in August 1997. He was named Treasurer
Secretary of the Company and Chief Financial Officer in November 1997. Mr. Young
has been the Vice President of IIAC and Merger Sub since
1997 and 1998, respectively. Since 1995, Mr. Young has
been Vice President of Constellation Capital Partners LLC.
Mr. Young has also been the Vice President of American
Enterprises MPT Corp. since 1996. From 1992 to 1995, he was
Director of Corporate Development of AMF Industries located
at 8100 AMF Drive, Mechanicsville, VA 23111.

Michael G. Ryan Vice President of the Company Mr. Ryan joined the Company as Vice President in August
1997. He has been Secretary of IIAC and Merger Sub since
1997 and 1998, respectively. Mr. Ryan was the Chief
Financial Officer of Equity Group Holdings from 1985 to
1997. Mr. Ryan is Vice President of Constellation Capital
Partners LLC, Colfax Communications, Inc. and American
Enterprises MPT Corp. and has held those vice presidencies
since 1995, 1991 and 1996, respectively. He is also
President of Colfax Capital Corp. and Janelia Farm Corp.
and has held those presidencies since 1997 and 1988,
respectively.

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Joseph O. Bunting III Vice President and Secretary of the Mr. Bunting joined the Company as Vice President in August
Company 1997 and became Secretary in November 1997. He has been
Treasurer of IIAC since 1997. He has been Treasurer of
Merger Sub since 1998. Mr. Bunting was Controller of
Equity Group Holdings from 1987 to 1997. He is also a Vice
President of Colfax Communications, Inc., Constellation
Capital Partners LLC, Colfax Capital Corp., Janelia Farm
Corp. and American Enterprises MPT Corp. and has held those
vice presidencies since 1991, 1995, 1997, 1988 and 1996,
respectively. He was also Vice President of Yield House,
Inc. through 1993.

The business address of each of Messrs. Steven M. Rales, Mitchell P.
Rales, Michael G. Ryan and Joseph O. Bunting III is 1250 24th Street,
N.W., Suite 800, Washington, DC 20037. The business address of
Messrs. Philip W. Knisely and John A. Young is 9211 Forest Hill
Avenue, Suite 109, Richmond, Virginia 23235.

(e)-(f) During the last five years, neither IIAC nor Merger Sub nor any of
the individuals listed in the table in the response to Items 2(a)-(d)
above, has been (i) convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to
a judgment, decree or final order enjoining future violations of, or
prohibiting activities subject to, federal or state securities laws
or finding any violation of such laws.

ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS

(a)(1) Except as described under Items 3(a)(2) and 3(b), since January 1,
1996, the only transactions between the Company, on the one hand, and
IIAC, Merger Sub, or their respective executive officers, directors
or controlling persons, on the other hand, have been the following:

On August 29, 1997, one day after IIAC acquired 92.8% of the Shares
as a result of the Tender Offer, the Company and certain of its
subsidiaries sold substantially all of the assets of its
Instrumentation Business Segment ("Instrumentation") to Danaher
Corporation, a company listed on the New York Stock Exchange, Inc.
("NYSE"), and certain of its subsidiaries for a purchase price of $85
million in cash and the assumption of liabilities. The agreement
governing the transactions had been negotiated by Danaher Corporation
and IIAC, which are affiliates, prior to the consummation of the
Tender Offer. Steven M. Rales and Mitchell P. Rales are major
stockholders of Danaher Corporation. Steven M. Rales is the Chairman
of Danaher's Board of Directors and Mitchell P. Rales is the
Chairman of the Executive Committee of Danaher's Board of Directors.
The transaction was negotiated at arm's length and the Company
received the opinion of an independent investment bank as to the
fairness to the Company, from a financial standpoint, of the
financial terms of the transaction taken as a whole. Net cash
proceeds were used to reduce domestic senior debt.

On December 31, 1997, the Company sold certain assets of its Delroyd
business unit to Nuttall Gear LLC for $2.3 million in cash. Also on
December 31, 1997, the Company acquired certain assets of the Centric
Clutch business unit of Ameridrives International, L.P. for $1.3
million in cash. Nuttall Gear LLC and Ameridrives International, L.P.
are subsidiaries of American Enterprise MPT Corporation. Steven M.
Rales and Mitchell P. Rales collectively own 76% of American
Enterprise MPT Corporation. The transactions were negotiated on an
arm's length basis, and were based on the valuations of independent
appraisers. Net cash proceeds were used to reduce domestic senior
debt.

(a)(2) On July 31, 1997, IIAC commenced the Tender Offer. IIAC and its
and (b) affiliates had been in negotiations with the Company for
several weeks prior to the commencement of the Tender Offer, during
the pendency of another tender offer in which United Dominion
Industries Limited ("UDI") had offered to pay $6.00 per Share in cash
for all the outstanding Shares. On July 25, 1997, IIAC and the
Company entered into a Share Purchase Agreement, which provided,
among other things, for the Tender Offer. On the same day, the
Company notified UDI that it was terminating its agreement with UDI.

The Tender Offer expired on August 27, 1997, and 92.8% of the Shares
were validly tendered. Upon consummation of the Tender Offer, the
members of the Board of Directors of the Company each resigned, and
the current Board of Directors took office. Messrs. Neil D. Cohen and
King David Boyer, Jr. were appointed as "Continuing Directors" for
purposes of the Company's Certificate of Incorporation.

On July 25, 1997, in connection with certain restrictions in the
Company's Certificate of Incorporation, before consummation of the
Tender Offer, the directors of the Company (none of whom were
affiliated with IIAC) approved a business combination between IIAC
and the Company, provided, among other things, that if the business
combination occurred before July 25, 1998, holders of Shares would
receive an amount in cash of not less than $7.05 per Share. In the
Tender Offer, IIAC stated that it intended to consummate a merger
with the Company if and when practicable, but noted that the
indenture governing the Company's 11 3/4% Senior Subordinated Notes
due May 1, 2006 (the "Notes") limited the ability of IIAC to
consummate such a Merger.

On September 16, 1997, the Company offered to repurchase all of the
outstanding Notes at 101% of the principal amount. No Notes were
tendered in the offer. On April 14, 1998, the Company commenced a
consent solicitation seeking the approval of holders of the Notes to
amend the indenture governing the Notes to permit the Company to
complete a "short-form" merger with and into a wholly-owned
subsidiary of IIAC. On May 6, 1998, the Company received sufficient
consents to effect the proposed amendments, and entered into a
supplemental indenture enacting the proposed amendments.

ITEM 4. TERMS OF THE TRANSACTION

(a)-(b) On June 1, 1998, IIAC, which had been the 92.8% owner of the Shares,
contributed 100% of its holdings of the Shares to Merger Sub, its
newly incorporated and wholly-owned Delaware subsidiary. Merger Sub
will be merged with and into the Company pursuant to Section 253 of
the Delaware General Corporation Law ("DGCL"). Under the DGCL,
because Merger Sub owns more than 90% of the Company, no action will
be required by the stockholders of the Company, other than Merger
Sub (through its Board of

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Directors), for the Merger to become effective. The effective date
of the Merger will be July 2, 1998 (the "Effective Date of the
Merger").

The Company will be the surviving corporation in the Merger and, as a
result of the Merger, will become a wholly-owned subsidiary of IIAC.
At the Effective Date of the Merger, each of the remaining
outstanding Shares (other than Shares held by Merger Sub, the
Company, and holders who properly exercise dissenters' rights under
Delaware law) will be automatically converted into the right to
receive $7.05 in cash, without interest, upon surrender of the
certificate for such Share to First Chicago Trust Company of New
York, as Paying Agent (the "Paying Agent"). The Notice of Merger and
Appraisal Rights and the accompanying Letter of Transmittal, which
explain the redemption procedure and the statutory appraisal rights
in fuller detail, are being sent to holders of the Shares together
with this Schedule 13E-3.

ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE

It is currently expected that, following the consummation of the Merger,
the business and operations of the Company will, except as set forth in
this Schedule 13E-3, be conducted by the Company substantially as they are
currently being conducted. IIAC intends to continue to evaluate the
business and operations of the Company with a view to maximizing the
Company's potential. As such, it will take such actions as it deems
appropriate under the circumstances and market conditions then existing.
The Company currently intends to terminate the registration of the Shares
under Section 12(g) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") following the Merger, which would result in the
suspension of the Company's duty to file reports pursuant to Section
15(d) of the Exchange Act. The Company also intends, following the
Merger, to delist its Shares from the NYSE.

Certain affiliates of the Company are considering restructuring various
assets and entities (including the Company) that are directly or
indirectly owned or controlled by such affiliates. Any such restructuring
would occur subsequent to the Merger, and as part of any such
restructuring, IIAC's ownership of the Company may be transferred to
another entity or be combined with the ownership of other entities. In
connection with any such restructuring, subject to market conditions, such
affiliates may pursue any of a variety of capital transactions involving
their combined holdings including, but not limited to, (i) acquiring other
manufacturing assets or companies, (ii) combining all or a part of such
holdings with a third party or (iii) pursuing a public offering of the
holder of the combined interests. Furthermore, in addition to or as part
of any such transactions, such affiliates may deem it appropriate to
pursue certain refinancing transactions involving the Company, including,
but not limited to, (i) refinancing the Notes, or (ii) refinancing the
Company's bank debt. However, no specific plans regarding any
restructuring involving the Company or any of its assets have been
considered by IIAC or its affiliates, and no assurance can be given as
to the timing of any such actions or whether they will occur at all.

As a consequence of the Merger, the equity capitalization of the Company
will be changed, although the debt capitalization will be unaffected by
the Merger. Following the Merger, the equity of the Company will consist
of 100 shares of common stock, $0.01 par value per share, all of which
will be owned by IIAC.

ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION

(a);(c) The total amount of funds required to consummate the Merger and to
pay related fees and expenses is estimated to be approximately $9
million. The Merger will be funded through contributions of equity to
the Company by IIAC. IIAC will obtain such funds through revolving
loans with each of its principal stockholders, Messrs. Steven M.
Rales and Mitchell P. Rales, for this purpose. Each such loan will be
in the form of a Subordinated Note due May 15, 2008, with a committed
face amount of $4,500,000 and a variable interest rate equal to the
sum of (a) the rate published from time to time in the Wall Street
Journal, as its "prime" rate determined with respect to the date that
is two business days prior to the applicable interest payment date
and (b) 0.375%, from the date of such note, payable in arrears on
the fifteenth day of November and May of each year.

(b) The estimated fees and expenses incurred and to be incurred by IIAC,
Merger Sub and the Company in connection with the Merger will be paid
by the Company and are as follows:

Paying Agent fees.......................... $5,000

Legal fees................................. $140,000

Accounting fees............................ $10,000

SEC filing fees............................ $1,723

Printing and mailing....................... $25,000

Miscellaneous.............................. $3,277

ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS

(a)-(c) The purpose of the Merger is to enable IIAC to acquire the remaining
equity interest in the Company, as well as to provide a source of
liquidity to the minority stockholders who desire to convert their
interests to cash. The Merger is also expected to enhance operating
flexibility and to reduce expenses. IIAC and Merger Sub are
structuring the transaction as a "short-form" merger under Section
253 of the DGCL to minimize the costs associated with effecting the
Merger.

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IIAC is undertaking the transaction at this time because the final
obstacles to such a transaction have now been removed. On July 31,
1997, IIAC commenced the Tender Offer. At the time of the Tender
Offer, IIAC stated its intention to purchase, if and when
practicable, any minority interest not acquired during the Tender
Offer. Prior to the commencement of the Tender Offer, the Company
made appropriate amendments to the Rights Agreement to permit a
second-step merger. The Company's directors (none of whom were
affiliated with IIAC), in order to nullify certain restrictive
provisions in the Company's Certificate of Incorporation, approved a
business combination between IIAC (or an affiliate thereof) and the
Company, provided, among other things, that if the business
combination occurred before July 25, 1998, holders of Shares would
receive an amount in cash of not less than $7.05 per Share. However,
if IIAC had effected a second-step merger, the Company would have
been in breach of certain restrictive covenants in the indenture
governing the Notes. On April 14, 1998, the Company commenced a
consent solicitation to holders of the Notes seeking approval to
amend the indenture governing the Notes to permit the Company to
effect the Merger. On May 6, 1998, the Company received the
requisite consents and executed a supplemental indenture enacting
the proposed amendments. Having removed the obstacles to acquiring
the remaining equity interest in the Company at the Tender Offer
price, IIAC intends now to effect the Merger.

In addition to the foregoing, certain correspondence from the NYSE
indicated that the Shares, which already trade infrequently, could
become even more illiquid. Specifically, on March 16, 1998, the
Company received a letter from the NYSE indicating the NYSE's
determination that the Company had fallen below certain continued
listing criteria, and that the NYSE was carefully considering the
appropriateness of the continued listing of the Shares. The Company
has been in contact with representatives of the NYSE, has taken the
position that the NYSE should maintain the listing of the Shares, and
has sought to persuade the NYSE to continue such listing. There can
be no assurance, however, that the NYSE will not attempt to delist
the Shares, and their future liquidity and market value may thus be
adversely affected. The Merger thus affords holders of the Shares an
outlet for liquidity, and is responsive to requests received by the
Company following the expiration of the Tender Offer from
unaffiliated holders of the Shares to purchase their Shares at $7.05
per Share.

(d) Certain Effects of the Merger

If the Merger is consummated, holders of the Shares (other than
Shares held by Merger Sub, the Company, and persons who have properly
exercised dissenters' rights under Delaware law) will have the right
to receive $7.05 per Share in cash, without interest, upon surrender
of the certificate for such Share to the Paying Agent.

As a result of the Merger, such stockholders will cease to have any
ownership interest in the Company, and will cease to participate in
future earnings and growth, if any, of the Company. Moreover, if the
Merger is consummated, public trading of the Shares will cease. IIAC
intends to have the Shares delisted from the NYSE. In addition, as a
consequence of the Merger, IIAC intends to deregister the Shares
under the Exchange Act; the Company will no longer be required under
the federal securities laws to file reports with the Commission and
will no longer be subject to the proxy rules under the Exchange Act.
However, as long as the Notes are outstanding, the Company will
continue to make periodic filings with the Commission as required by
the indenture governing the Notes.

The Shares are currently "margin securities," as such term is defined
under the rules of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), which has the effect, among
other things, of allowing banks to extend credit on the collateral of
such securities. Depending upon certain factors, following the
Merger, it is possible that the Shares might no longer constitute
"margin securities" for purposes of the margin regulations of the
Federal Reserve Board, in which event such Shares might no longer be
eligible for collateral for loans made by banks.

In the Merger, IIAC will pay approximately $8.6 million plus expenses
to acquire the equity interest represented by the Shares it does not
already own. As a result of the Merger, IIAC will increase its
ownership of the Company from 92.8% to 100%.

On a pro forma basis, IIAC's beneficial interest in the Company's net
book value (shareholder's equity) at April 3, 1998 would increase
from $81.3 million to $87.6 million, and its share of the Company's
net losses for the three months then ended would increase from $2.1
million to $2.3 million.

Certain Federal Income Tax Consequences of the Merger.

The following discussion summarizes the material United States
federal income tax consequences of the Merger, based on the Internal
Revenue Code of 1986, as amended (the "Code"), currently applicable
Treasury regulations, and judicial and administrative decisions and
rulings. Future legislative, judicial or administrative changes or
interpretations could alter or modify the statements and conclusions
set forth herein, and any such changes or interpretations could be
retroactive and could affect the tax consequences to holders of
Shares.

The discussion below does not purport to deal with all aspects of
United States federal income taxation that may affect particular
stockholders in light of their individual circumstances, and does not
deal with stockholders subject to special treatment under the federal
income tax law (including insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, foreign
persons, stockholders who hold their Shares as part of a hedge,
appreciated financial position, straddle or conversion transaction,
stockholders who do not hold their stock as capital assets and
stockholders who have acquired their Shares upon the exercise of
employee options or otherwise as compensation).

A stockholder whose shares are converted, pursuant to the Merger,
into a right to receive cash will recognize gain or loss equal to the
difference between (i) the amount of cash that such stockholder
receives in the Merger and (ii) such stockholder's adjusted tax basis
in such Shares, assuming that such stockholder redeems all of the
Shares that such stockholder actually owns or constructively owns
under Section 318 of the Code. Such gain or loss will be capital gain
or loss, and generally will be long-term capital gain or loss if at
the Effective Date of the Merger the stockholder's holding period
for the Shares is more than one year. Under recently enacted
legislation, a reduced rate on capital gains will apply to an
individual stockholder if the stockholder's holding period for the
Shares is more than 18 months at the Effective Date of the Merger.
Holders of Shares should be aware that the Paying Agent will be
required in certain cases to withhold and remit to the United
States Treasury 31% of amounts payable in the Merger to any
stockholder that (i) has provided either an incorrect tax
identification number or no number at all, (ii) is subject to backup
withholding by the Internal Revenue Service for failure to report
the receipt of interest or dividend income properly, or (iii) has
failed to certify to the Paying Agent that such stockholder is not
subject to

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backup withholding or that such stockholder is an "Exempt Recipient."
Backup withholding is not an additional tax, but rather may be
credited against the taxpayer's tax liability for the year.

Neither IIAC, nor Messrs. Steven M. Rales and Mitchell P. Rales, nor
the Company expects to recognize any gain, loss or income by reason
of the Merger.

EACH HOLDER OF SHARES IS STRONGLY URGED TO CONSULT WITH SUCH HOLDER'S
TAX ADVISER TO DETERMINE THE PARTICULAR UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER IN LIGHT OF SUCH
HOLDER'S SPECIFIC CIRCUMSTANCES, AS WELL AS THE APPLICABILITY AND
EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.

ITEM 8. FAIRNESS OF THE TRANSACTION

(a)-(f) Each of IIAC and Merger Sub believes that the transaction described
in this Schedule 13E-3 is fair to the public stockholders of the
Company. In reaching such determinations, the following factors were
considered. The discussion of the factors considered is not intended
to be exhaustive but summarizes the material factors considered.

- The fact that the price per Share ($7.05) is the same price as
that offered in the Tender Offer, which was unanimously
recommended by the Company's directors, none of whom was
affiliated with IIAC. The Company's Board of Directors at that
time had obtained an opinion of Credit Suisse First Boston
Corporation, dated July 25, 1997, to the effect that, subject to
the matters set forth therein, the consideration to be received
by holders of Shares in the Tender Offer was, as of the date of
such opinion, fair to such holders from a financial point of
view. Holders of more than 92% of the Shares tendered their
Shares in response to the Tender Offer, and, since the
expiration of the Tender Offer, the Company has received
requests to purchase Shares at $7.05 per Share from
unaffiliated stockholders who failed to tender such Shares in
the Tender Offer.

- The fact that, immediately prior to the Tender Offer, UDI had
offered to purchase all the outstanding Shares at $6.00 per
Share, and the Company's Board of Directors had received a
fairness opinion from Credit Suisse First Boston Corporation as
to the $6.00 offer price, along the same lines as the opinion
described above. The Merger price per Share represents a premium
of 17.5% over the price offered by UDI.

- The fact that before IIAC became an affiliate of the Company,
the Company's Board of Directors, in order to permit a future
merger between IIAC and the Company and to satisfy limitations
otherwise applicable to such a merger under the Company's
Certificate of Incorporation, approved a business combination
between IIAC (or an affiliate of IIAC) and the Company, provided
that, among other things, it occurred by July 25, 1998 and
involved the receipt by holders of Shares of at least $7.05 per
Share in cash.

- The trading price and volume history of the Shares since the
consummation of the Tender Offer and the fact that the daily
closing price of the Shares has not exceeded $7.00 since the
consummation of the Tender Offer. The Merger price represents a
premium of 18% over the average daily closing price of the
Shares between August 29, 1997, the date of the consummation of
the Tender Offer, and May 29, 1998, the last trading day before
this Schedule 13E-3 was filed.

- The fact that IIAC is not interested in selling its Shares.

- The fact that the Merger price represents a significant premium
over various internal valuation analyses prepared by IIAC. Such
analyses include comparisons to comparable companies based on
trailing and projected earnings as well as a "breakup" valuation
analysis.

- The fact that the Merger price represents a premium of 37.7%
over the $5.12 book value per Share as of April 3, 1998, the
most recent quarter-end, and a premium of $14.96 per Share over
the negative net tangible book value of $7.91 as of April 3,
1998.

- The continued illiquidity of the Shares, including the facts
that there has been limited public trading in the Shares
following completion of the Tender Offer (the average daily
trading volume of the Shares since the consummation of the
Tender Offer has been less than 2,600 Shares per day) and, as
noted in Item 7(c), the NYSE has observed that the Company has
fallen below certain continued listing criteria and that the
NYSE was carefully considering the appropriateness of the
continued listing of the Shares.

- The fact that the Company's long-term debt instruments place a
variety of restrictions on the Company's ability to pay
dividends on the Shares.

- IIAC's belief that the Merger price is fair, relative to the
Company's operating results and prospects, after taking into
account the sales of Roltra-Morse and Instrumentation.

In light of the number and variety of factors considered in
connection with the evaluation of the Merger, it was not deemed
practicable to assign relative weights to the foregoing factors, and,
accordingly, no relative weights were assigned.

The Merger is structured so as not to require the approval of a
majority of the Shares held by public stockholders. The Tender Offer
was conditioned on the tender of more than 80% of the outstanding
Shares, and more than 92% of the outstanding Shares were in fact
tendered in the Tender Offer.

Because the Merger is being effected as a "short-form" merger under
Delaware law, it does not require approval either by stockholders
(other than Merger Sub) or by the Board of Directors of the Company.
As noted above, the Tender Offer was unanimously recommended by the
Board of Directors (including the non-employee directors) of the
Company, none of whom was affiliated with IIAC. IIAC and Merger Sub
believe that effecting the transaction as a "short-form" merger is
the quickest and least costly way to effect the acquisition of the
remaining equity interest in the Company, and to pay the purchase
price for that equity interest to the other stockholders as quickly
as possible.

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ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS

(a)-(c) The Company has not obtained a report from an outside party relating
to the Merger.

ITEM 10. INTEREST IN SECURITIES OF THE ISSUER

(a) Merger Sub is the beneficial owner of 15,905,971 Shares, representing
92.8% of the outstanding Shares. Because IIAC owns 100% of the equity
interest in Merger Sub, and because Messrs. Steven M. Rales and
Mitchell P. Rales have a controlling equity interest in IIAC, each
may also be deemed to be the beneficial owners of these Shares.

(b) With the exception of the contribution of the Shares from IIAC to
Merger Sub on June 1, 1998, none of the Shares referred to in the
preceding paragraph was acquired in the past 60 days.

ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE
ISSUER'S SECURITIES

The senior bank lenders under the Credit and Guaranty Agreement,
dated as of August 29, 1997, among the Company, IIAC, certain
financial institutions, The Bank of Nova Scotia and NationsBanc
Capital Markets Inc., as amended (the "Credit and Guaranty
Agreement"), were granted a lien on the 92.8% of the Shares owned by
IIAC. As a result of the Merger, IIAC will own, and the senior bank
lenders will have a lien upon, 100% of the outstanding common stock
of the Company.

ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD
TO THE TRANSACTION

(a) Not applicable.

(b) As a "short form" merger pursuant to Section 253 of the DGCL, the
transaction described in this Schedule 13E-3 will not require
approval by the board of directors of the Company or by any of the
Company's stockholders other than Merger Sub (by action of its
board).

ITEM 13. OTHER PROVISIONS OF THE TRANSACTION

(a) Holders of the Shares are entitled to appraisal rights under Section
262 of the DGCL. A person having a beneficial interest in Shares held
of record in the name of another person, such as a broker or nominee,
must act promptly to cause the record holder to follow the steps
summarized below properly and in a timely manner to perfect whatever
appraisal rights the beneficial owner may have.

THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW
PERTAINING TO APPRAISAL RIGHTS UNDER THE DGCL AND IS QUALIFIED IN ITS
ENTIRETY BY THE FULL TEXT OF SECTION 262, WHICH IS REPRINTED IN ITS
ENTIRETY AS APPENDIX A TO THE NOTICE OF MERGER AND APPRAISAL RIGHTS
ATTACHED TO THIS SCHEDULE 13E-3 AS EXHIBIT (E). All references in
Section 262 and in this summary to a "stockholder" are to the record
holder of the Shares as to which appraisal rights are asserted. As
used herein, "Surviving Corporation" means the Company as the
corporation surviving the Merger.

Under the DGCL, holders of Shares who do not wish to accept pursuant
to the Merger the consideration of $7.05 per Share and who follow the
procedures set forth in Section 262 will be entitled to have their
Shares appraised by the Delaware Court of Chancery and to receive
payment in cash of the "fair value" of such Shares, exclusive of any
element of value arising from the accomplishment or expectation of
the Merger, together with a fair rate of interest, if any, as
determined by such court. Any holder of Shares who wishes to exercise
such appraisal rights, or who wishes to preserve his right to do so,
should review carefully the following discussion, the Notice of
Merger and Appraisal Rights and the Appendix A thereto, because
failure to timely and properly comply with the procedures specified
will result in the loss of appraisal rights under the DGCL.

A holder of Shares wishing to exercise his appraisal rights must
deliver to the Secretary of the Company, ON OR BEFORE JUNE 25, 1998,
a written demand for appraisal of his Shares. A demand for appraisal
should be delivered to the Company at the following address:

Imo Industries Inc.
1009 Lenox Drive, Building Four West
Lawrenceville, New Jersey 08648-0550
Attn: Corporate Secretary

As provided under Section 262, failure of a holder of Shares to make
a written demand for appraisal (or a beneficial owner of Shares who
fails to cause the record holder of such Shares to demand an
appraisal of such Shares) within such time limit will result in the
loss of such holder's appraisal rights.

Only a holder of record of the Shares is entitled to assert appraisal
rights for the Shares registered in that holder's name. A demand for
appraisal must be executed by or on behalf of the holder of record,
fully and correctly, as his or her name appears on the stock
certificates for the Shares. If the Shares are owned of record in a
fiduciary or representative capacity, such as by a trustee, guardian
or custodian, execution of the demand should be made in that
capacity, and if the Shares are owned of record by more than one
person, as in a joint tenancy and tenancy in common, the demand
should be executed by or on behalf of all joint owners. An authorized
agent, including one or more joint owners, may execute a demand for
appraisal on behalf of a holder of record; however, the agent must
identify the record owner or owners and expressly disclose the fact
that, in executing the demand, the agent is agent for such owner or
owners. A record holder such as a broker who holds Shares as nominee
for several beneficial owners may exercise appraisal rights with
respect to the Shares held for one or more beneficial owners while
not exercising such rights with respect to the Shares held for other
beneficial owners; in such case, the written demand should set forth
the number of Shares as to which appraisal is sought and when no
number of Shares is expressly mentioned the demand will be presumed
to cover all Shares held in the name of the record owner.
Stockholders who hold

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their Shares in brokerage accounts or other nominee forms and who
wish to exercise appraisal rights are urged to consult with their
brokers to determine the appropriate procedures for the making of a
demand for appraisal by such a nominee.

Within 120 calendar days after the Effective Date of the Merger, but
not thereafter, the Surviving Corporation, or any stockholder who is
entitled to appraisal rights under Section 262 and has complied with
the requirements of Section 262, may file a petition in the Delaware
Court of Chancery demanding a determination of the fair value of the
Shares. The Surviving Corporation is under no obligation to and has
no present intention to file a petition in respect to the appraisal
of the fair value of the Shares. Accordingly, it is the obligation of
the stockholders to initiate all necessary action to perfect their
appraisal rights within the time prescribed in Section 262. At any
time within 60 calendar days after the Effective Date of the Merger,
any stockholder who has demanded appraisal has the right to withdraw
the demand and accept the consideration offered pursuant to the
Merger.

Within 120 days after the Effective Date of the Merger, any
stockholder who has complied with the requirements under Section 262
for exercise of appraisal rights will be entitled, upon written
request, to receive from the Surviving Corporation a statement
setting forth the aggregate number of Shares with respect to which
demands for appraisal have been received and the aggregate number of
holders of such Shares. Such statement must be mailed (a) within 10
calendar days after a written request therefor has been received by
the Surviving Corporation, or (b) by July 5, 1998 (i.e., within 10
calendar days after the expiration of the period of delivery of
demands for appraisal), whichever is later.

If a petition for an appraisal is duly filed by a holder of Shares,
and a copy thereof is delivered to the Surviving Corporation. the
Surviving Corporation will then be obligated within 20 calendar days
to provide the Register in Chancery with a duly verified list
containing the names and addresses of all holders of Shares who have
demanded an appraisal of their Shares and with whom agreements as to
the value of their Shares have not been reached by the Company. After
notice to holders of Shares, the Delaware Court of Chancery is
empowered to conduct a hearing on such petition to determine those
holders of Shares who have complied with Section 262 and who have
become entitled to appraisal rights. The Delaware Court of Chancery
may require the holders of Shares who have demanded an appraisal for
their Shares to submit their stock certificates to the Register in
Chancery for notation thereon of the pendency of the appraisal
proceeding; and if any holder of Shares fails to comply with such
direction, the Delaware Court of Chancery may dismiss the proceedings
as to such stockholder.

After determining the stockholders entitled to an appraisal, the
Delaware Court of Chancery will appraise the "fair value" of their
Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair
rate of interest, if any, to be paid upon the amount determined to be
the fair value. The Delaware Supreme Court has stated that "proof of
value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in
court" should be considered in the appraisal proceedings. In
addition, Delaware courts have held that the Section 262 appraisal
remedy, depending on factual circumstances, may or may not be a
dissenter's exclusive remedy. The Court will also determine the
amount of interest, if any, to be paid upon the amounts to be
received by persons whose Shares have been appraised.

The costs of the appraisal proceeding may be determined by the Court
and taxed upon the parties as the Court deems equitable in the
circumstances. The Court may also order that all or a portion of the
expenses incurred by any stockholder in connection with an appraisal,
including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts utilized in the appraisal proceeding, be
charged pro rata against the value of all the Shares entitled to be
appraised.

No stockholder, whether or not he has duly demanded an appraisal in
compliance with Section 262, will, from and after the Effective Date
of the Merger, be entitled to vote any Shares for any purpose or be
entitled to the payment of dividends or other distributions on any
Shares (except dividends or other distributions payable to
stockholders of record at a date prior to the Effective Date of the
Merger).

If any stockholder who demands appraisal of his Shares under Section
262 fails to perfect, or effectively withdraws or loses, his or her
right to appraisal, as provided in the DGCL, the Shares of such
stockholder will be converted into the right to receive $7.05 in cash
per Share, without interest. Such stockholders must follow the
procedures set forth in the Letter of Transmittal and accompanying
instructions.

FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.

(b)-(c) Not applicable.

ITEM 14. FINANCIAL INFORMATION

(a)(1)-(2) Exhibits (g)(1) and (g)(2) are incorporated herein by reference.

(a)(3) The ratio of earnings to fixed charges of the Company for the
quarter ending April 3, 1998, was 1.64. For fiscal 1996, the period
in fiscal 1997 prior to the consummation of the Tender Offer and the
period in fiscal 1997 subsequent to the consummation of the Tender
Offer, the fixed charges of the Company exceeded its earnings by
$20.4 million, $30.0 million and $5.5 million, respectively.

(a)(4) Book value per share of the Company as of the end of fiscal year 1997
and as of April 3, 1998, were $5.27 and $5.12, respectively.

(b) Completion of the Merger is not expected to have a material effect on
the Company's balance sheet, earnings, or book value per share.

ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED

(a); (b) None.

ITEM 16. ADDITIONAL INFORMATION

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None.

ITEM 17. MATERIAL TO BE FILED AS EXHIBITS

(a)(1) Subordinated Note dated May 29, 1998 issued by IIAC to Michell P.
Rales.

(a)(2) Subordinated Note dated May 29, 1998 issued by IIAC to Steven M.
Rales.

(b) None.

(c) Credit and Guaranty Agreement dated as of August 29, 1997 among IIAC,
the Company, certain financial institutions, the Bank of Nova Scotia,
and NationsBanc Capital Markets, Inc.**

(d) Letter to Stockholders from the IIAC.*

(e) Notice of Merger and Appraisal Rights.*

(f) None.

(g)(1) Audited financial statements for the fiscal years required to be
filed with the Company's annual report for the year ended December
31, 1997.*

(g)(2) Unaudited financial statements required to be included in the
Company's quarterly report for the period ended April 3, 1998.*

* Included in materials sent to stockholders.
**Incorporated by reference to Exhibit 10 to the Company's Quarterly Report on
Form 10-Q for the period ending September 30, 1997.

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SIGNATURE

After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true,
complete and correct.

June 1, 1998
II ACQUISITION CORP.

By: /s/ Philip W. Knisely
____________________________
Name: Philip W. Knisely
Title: Chief Executive Officer
and President

IMO MERGER CORP.