Tyco Does It Again

In stark contrast to the American people’s  growing heft, American conglomerates appear to be on a steady diet, often slimming down via spinoffs. Break up expert and Swiss-conglomerate Tyco International (TYC) is the latest fad follower as the company announced plans to split itself into three separate companies. The new businesses will be:

• ADT North America (residential security): Provides security and fire alarm systems. The unit will have revenues of ~$3 billion and ~16,000 employees
• Flow control products and services: Designs, sells and services highly engineered valves and controls for the energy markets, general process industries, mining and water markets. The unit will have revenues of ~$4 billion and ~15,000 employees.
• Commercial Fire and Security: Designs, manufactures, sells, installs and services security, fire detection and fire suppression systems. The company will have revenues of ~$10 billion and ~69,000 employees.

According to current CEO and Chairman Ed Breen, each company will “have industry-leading positions in large and fragmented industries and…have greater flexibility to pursue their own focused strategies.” As is always the case with these breakups, several analysts have predicted that the new, more easily digestible companies are likely to become takeover targets.

Mr. Breen (who took over the reigns from epic partier and currently imprisoned Dennis Kozlowsky) will have roles at all three companies, but none appear to be direct management responsibilities. Instead, the current president of each segment will become CEO of their respective companies. Additionally, only the ADT business is expected to be incorporated in the US.

Tyco has been no stranger to spinoffs under Mr. Breen’s leadership as the company spun out two entities (Covidian [COV] and TE Connectivity) in 2007. Tyco also holds a soft spot in our hearts at StockSpinoffs because the company was the subject of our inaugural post –  that spin was never consummated though as the company sold off the division instead.

The spins are expected to occur in about a year and will be subject to a shareholder vote. A lot can change in the meantime and we will keep you updated as more information is released.

Disclosure: Author holds no position in any stock mentioned.