Tyco Plans to Unlock Billions in Shareholder Value; Will Separate Into 4 Independent Public Companie
Tyco Int’l. Ltd. plans to unlock tens of billions of dollars of shareholder value by separating Tyco into four independent, publicly traded companies: Security and Electronics; Healthcare; Fire Protection and Flow Control; and Financial Services. Tyco believes these actions will lead to substantially greater total shareholder value by creating independent companies that will be more appropriately valued by the market.
Each new public company created from these transactions will have a separate management team and an independent Board of Directors.
Under the plan, unanimously approved by the company’s Board of Directors at its analyst meeting today, Tyco’s Healthcare, Fire Protection and Flow Control, and Financial Services businesses will be taken public through initial public offerings (IPOs) and then distributed to Tyco shareholders. Tyco’s Security and Electronics businesses will be combined as a fourth independent, publicly traded company. Tyco Plastics, one of the United States’ largest makers of plastic film and other plastic products, will be sold.
Dennis Kozlowski, chairman and CEO of Tyco, said this plan is a shareholder-value driven plan that it believes will create near- and long-term benefits for Tyco’s shareholders and bondholders, as well as for its employees and customers. “Over the past decade, Tyco’s share price has increased ten-fold as we have used Tyco’s size, access to capital and operating philosophy … to these businesses. These businesses have now developed to a size and stage where they can thrive on their own and perhaps be even more agile than Tyco,” he said. “The plan we are announcing today is the logical extension of the same value creation strategy we have successfully pursued for nearly a decade.”
Tyco said it expects to complete the first of these IPOs—Tyco Capital—in the second quarter of calendar 2002 and to complete all of the planned transactions by the end of calendar 2002. Each IPO, distribution or sale of a business will be subject to customary approvals. No tax approvals are required for these transactions. The distributions to shareholders are expected to be treated as returns of capital, which minimize the tax consequences to most shareholders. Each company will remain based in Bermuda.
With pro forma 2001 revenues of approximately $17.6 billion, Tyco’s Security and Electronics business would consist of the world’s largest residential and commercial security services company, and one of the world’s largest makers of a broad range of high-quality electronic component products; multilayer printed circuit boards; electrical and electronic components; power systems; and fiber-optic and wireless interconnection solutions.
Kozlowski will be Chairman and CEO, and Mark Swartz will be CFO, of the Security and Electronics company.
In addition to creating value for Tyco shareholders, these transactions will have an effect on Tyco’s balance sheet. Using proceeds from the IPOs and the sale of its Plastics business, Tyco expects to eliminate at least $11 billion of debt.
Tyco said its intention is to offer to repurchase most of the public bonds issued by Tyco Int’l. Group S.A. Those bonds not repurchased will continue to be obligations of the current obligors and holders will be treated under the terms of the respective indentures. Tyco intends to offer to repurchase the convertible bonds. Those convertible bonds not repurchased will continue to be obligations of Security and Electronics.
Appropriate provisions will be made under the terms of the indentures of the convertible bonds not purchased, which may include having them become convertible into an appropriate number of shares of each of the four public companies.
“The plan announced today is designed to close the gap between Tyco’s market value in recent years and the value of our businesses. Our objective has always been to deliver value to our shareholders,” Kozlowski said. “That is why we are taking this action today, and why we are all very excited about the future.”
Tyco security services are provided worldwide under the ADT trade name. Tyco recently completed acquisitions of Sensormatic, a supplier of electronic security systems and integrated sourcing tagging for consumer goods, and SecurityLink Protection Services, which expanded ADT’s capabilities in the market for personal emergency response systems. Tyco monitors over seven million customer sites.
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