Tyco International Plans to Separate Into Three Companies

By Ed Silverstein September 22, 2011

Tyco International plans to divide itself into three independent companies.

The three companies – each publically traded – will include: ADT North America (residential security); a provider of flow control products and services; and a commercial fire and security business, according to a company press release.

"Over the last four years, we have strengthened our competitive position in our core security, fire and flow control businesses by driving organic growth, investing in R&D and technology, increasing efficiency and productivity and making strategic acquisitions," Tyco Chairman and CEO Ed Breen said in the press release. "Today, each business is in a strong financial position and has exceptional brands, highly skilled employees and talented, experienced leadership."

“The Tyco Board of Directors concluded that creating three independent, public companies is the next logical step for Tyco," Breen adds. "All three companies will have industry-leading positions in large and fragmented industries and enhanced capabilities to serve their distinct customers. Importantly, the new standalone companies will have greater flexibility to pursue their own focused strategies for growth – both organic and through acquisitions – than they would under Tyco's current corporate structure. This will allow all three companies to create significant value for shareholders."

The transaction is expected to be completed in about one year, and still needs the approval of Tyco shareholders.

Reuters said the move makes it easier for company operations to be acquired by another entity.

Breen will likely become non-executive chairman of the commercial fire and security company, a director of the flow control company, and a consultant to ADT North America, according to the press release.

One-time costs for the deal are expected to total approximately $700 million – paying for debt refinancing, separation and restructuring costs.

Reuters also reports that parts of Tyco may appeal to other companies, according to Jeff Sprague, an analyst at Vertical Research Partners.

Possible buyers of ADT are: AT&T, Verizon, Comcast, Stanley Black & Decker or a private equity firm, Sprague said. Possible buyers of the commercial fire and security business include France's Schneider, Germany's Siemens and U.S.-based United Technologies, Honeywell International or Johnson Controls, Sprague said. And United Technologies or GE could be interested in the flow-control business, he said, or the entity could merge with ITT's flow unit, Flowserve or Swiss-based Sulzer AG, Sprague said.

In another recent story, it was reported that Visonic Ltd, a supplier of wireless home security and safety systems and components, will be acquired by Tyco International for about $100 million, according to TechZone 360.

Ed Silverstein is a TechZone360 contributor. To read more of his articles, please visit his columnist page.

Edited by Rich Steeves

TechZone360 Contributor

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