Tyco International Ltd., Pembroke, Bermuda, has announced plans to separate the company into four independent, publicly traded companies in order to increase shareholder value.
Under the plan, already approved by the company's board of directors, Tyco's healthcare, fire protection & 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 manufacturers of plastic film and other plastic products, will be sold.
Each new public company created from these transactions will have its own management team and independent board of directors.
Tyco believes that these independent companies will lead to greater total shareholder value because each will be more appropriately valued by the market.
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 company will remain based in Bermuda.
In addition to creating substantial value for Tyco shareholders, these transactions will have a positive 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.
L. Dennis Kozlowski, chairman and chief executive officer of Tyco, said “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 build world-class healthcare, electronics, telecommunications, security, fire protection, flow control, and financial services 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.”
This plan comes not long after questions resurfaced on Tyco's accounting procedures. Tyco, which has made over 120 acquisitions since June 1992, with a total value of at least $60 billion, had been the subject of an SEC investigation on its accounting practices, which concluded in July of 2000 without the SEC taking action.