In an effort to jump-start its sluggish stock price, Tyco International, Exeter, N.H., recently announced plans to break itself into four independent, publicly traded companies: security and electronics, health care, fire protection and flow control, and financial services. The move comes on the heels of rumors that the Securities and Exchange Commission was investigating the company and after Tyco shares had fallen 19.3% since the beginning of the year.
Although news of the split initially drove the stock price up 2.4% to $47.55, shares dropped to $42.49 only days later. Industry analysts believe the collapse of energy giant Enron Corp. has made investors skeptical of transactions similar to Tyco’s split.
As part of the move, Tyco’s electronics division of companies, which includes Area Lighting Research, Madison Cable, and Tyco Electronics Power Systems, will be combined with its security companies, ADT burglar alarms among them. Together, the two divisions posted revenues of $17.6 billion and netted a $4.2 billion profit in 2001. Those numbers make the new independent company one of the largest manufacturers of electronic component systems, power systems, and fiber optic and wireless interconnection equipment.
“As independent, public companies, each of these businesses will offer investors a ‘pure-play’ opportunity with excellent growth prospects and greatly increased simplicity, clarity, and transparency,” says L. Dennis Kozlowski, chairman and CEO of Tyco and the future independent security and electronics company. “We believe each will be valued substantially higher than the implied valuations it has received in recent years as part of Tyco.”