NEW YORK—Reeling from the resignation of CEO Dennis Kozlowski, who was charged by a Manhattan district attorney in May with tax violations on his personal finances, Tyco Int’l Inc. received the OK from the Securities Exchange Commission (SEC) for the initial public offering of its CIT Group financial unit. Selling the CIT unit would help Tyco pay off $3.25 billion of its $23 billion total debt.
Soon after Tyco received approval for the IPO, the SEC announced it would formally investigate the company about Kozlowski’s criminal charges “and any other issues that arise from that investigation.” Tyco then announced it would streamline its corporate operations and locations. The company said its divisions would not be affected by this decision.
With all of Tyco’s current woes, it has lost about $100 billion in market value since the beginning of this year amid investor concerns about its debt obligations and corporate strategy.
Financial analysts say, despite Tyco’s large debt and its corporate management challenges, its divisions have qualified management and are financially sound. “The fact that Kozlowski has been indicted means directly nothing to the electronic security industry,” says Michael Jones of ProFinance Associates of San Diego. “For the most part, Tyco is a company that has a real depth of management. The way it will impact ADT and the other companies within the security field is through access to capital.”
“Fundamentally, Tyco has cash to conduct business,” adds John Mack, CEO of U.S. Business Exchange (USBX) Advisory Services in Santa Monica. Mack says, at this point, the fire and security division could have less focus from corporate management since Kozlowski was a big supporter of the division and was very proactive with acquisitions at a small level.
In regard to its debt, analysts suggest Tyco could consider selling assets from each of its divisions in the future. However, the company has not made such a decision. “If Tyco needs to raise cash, the most likely place it may go is security,” Mack says.
