PEMBROKE, BERMUDA — Tyco International's board of directors in mid-January approved a plan to split the company into three separate, publicly traded companies: a combination of Tyco Fire & Security and Engineered Products & Services; Tyco Electronics; and Tyco Healthcare.
The company intends to accomplish the separation through tax-free stock dividends to Tyco shareholders, after which they will own 100% of the equity in three publicly traded companies. Each company will have its own board of directors and corporate governance standards. Tyco expects to complete the transactions a year from now during the first quarter of 2007.
Tyco International Chairman and CEO Ed Breen as well as Tyco International Chief Financial Officer Chris Coughlin will lead Tyco Fire & Security/Engineered Products & Services. TFS/TEPS is an $18 billion company that provides electronic security solutions for residential, business and governmental customers; fire protection and sprinkler systems; and industrial valves and controls. With about 118,000 employees, TFS/TEPS has a recurring revenue base and strong cash flow, the company said.
Dave Robinson will continue to serve as president of TFS. Naren Gursahaney will succeed Tom Lynch as president of TEPS. Lynch will take over Tyco Electronics.
TFS is composed of fire sprinkler and alarm company SimplexGrinnell, ADT, Wormald fire equipment, Ansul commercial/ industrial fire protection equipment, Scott breathing apparatus and several other companies.
TEPS manufactures fire sprinklers under the Grinnell, Central, Gem, Star and Tyco Fire Products brands, including a line of residential sprinklers. It also manufactures sprinkler system valves.
TEPS is composed of: Tyco Fire & Building Products; Tyco Flow Control, a maker of industrial valves and actuators for process piping systems; Tyco Thermal Control, a provider of heattracing products; Tyco Infrastructure Services, which specializes in engineering and construction of water/wastewater systems; and Tyco Electrical & Metal Products, a maker of tubular and electrical raceway products.
SimplexGrinnell, which is probably the largest U.S. fire sprinkler contractor although the company will not disclose its revenues, employs 11,000 in 150 offices in every state except South Dakota. It is managed by Deb Coller from its Boca Raton, Fla., headquarters.
Tyco's board and senior leadership evaluated a range of strategic alternatives, including continuation of Tyco's current operating strategy, sales of select businesses and separation of only one of the businesses. The company and board concluded that separating into three businesses is the best way to position the companies for sustained growth and value creation.
It is anticipated that all three companies will be capitalized to provide financial flexibility. They are expected to have financial policies, balance sheets and credit that are commensurate with investment grade credit ratings. Tyco will continue to follow financial policies that are consistent with its current credit ratings until the planned transactions take place. The company's existing debt will be allocated among the three companies or refinanced. The three entities together are initially expected to pay a dividend that is equal in sum to the current Tyco dividend.
One-time transaction costs are expected to total $1 billion — largely for tax and debt refinancing. Under the proposed transaction structure, each of the companies is expected to remain incorporated in Bermuda.