March 1, 2024

DealBook: Tyco to Split Into Three Companies

TycoDaniel Acker/Bloomberg News Tyco wants to separate its North American residential alarm system unit, its flow control group and its commercial security business.

Tyco International said that it planned to split into three public companies, the latest business to announce a breakup to bolster growth.

In the next year, the conglomerate is looking to cleave off its North American residential alarm system unit, its flow control group and its commercial security business into separate companies.

“All three companies will have industry-leading positions in large and fragmented industries and enhanced capabilities to serve their distinct customers,” Tyco’s chief executive, Edward D. Breen, said in a statement. “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.”

At the urging of investors and analysts, several big companies have been looked to spinoffs and separations, as a way to address sluggish growth and stagnant stock returns. The theory is that the companies are worth more in pieces than whole.

Fortune Brands, which last year said it would break into three businesses, spirits, home products and golf, is close to completing its strategic split. Fortune Brands Home Security and Beam, the maker of Jim Beam and Maker’s Mark, are both expected to start trading on Oct. 4. In May, the company agreed to sell its golf business to an investment group led by the owner of the Fila sports brand for $1.23 billion in cash.

Amid pressure from activist investors, McGraw-Hill announced in September that it would spin off its education business, leaving its fast-growing business information unit. Kraft is moving to separate its global snacks business from its North American grocery group.

In all, more than a dozen companies have announced plans to spin off divisions this year.

Tyco has been down the breakup path before, too. In 2007, it spun offits health care business and electronics group into two companies. Its finance arm, in 2002, became an independent company, CIT Group.

In many ways, Mr. Breen has been dismantling the company built by his disgraced predecessor, L. Dennis Kozlowski, who was convicted of fraud. During his tenure, Mr. Kozlowski was an aggressive deal maker, turning Tyco into a sprawling conglomerate with interests in finance, materials, security systems and medical products, among other industries.

Following the split, Mr. Breen is expected to become nonexecutive chairman of the commercial group. He will also serve as a director at the flow control company and consult at the residential security business. The breakup is expected to be completed in the next year.

“We will have strong leadership teams at the board and management levels of all three companies, enabling each business to take full advantage of the attractive growth opportunities that lie ahead,” Mr. Breen said in a statement.

Article source: http://feeds.nytimes.com/click.phdo?i=147a96a07208d90e3b85ade0bb015ff7

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