Tyco plans split into four companies; will sell plastics division

To increase shareholder value and pay off about $11 billion in debt, Tyco International Ltd. announced Jan. 22 a plan to divide itself into four independent, publicly traded companies. Each would focus on one of Tyco’s four existing businesses: security and electronics, healthcare, fire protection and flow control, and financial services. The new firms’ headquarters would continue to be based in Bermuda. Tyco Plastics, which its parent says is one of the largest manufacturers of plastic film and other plastic products in the U.S., would be sold.

Tyco expects these moves will lead to substantially greater shareholder value by creating independent companies that will be more appropriately valued by the market. “Each new public company created from these transactions will be a proven industry leader, and each will go forward with a global market position, a strong and experienced management team, an entrepreneurial culture, an independent board of directors, and significant financial strength,” states Tyco.

Already unanimously approved by the company’s board of directors, the plan calls for Tyco’s healthcare, fire protection and flow control, and financial services businesses to be taken public through initial public offerings (IPOs), and then distributed to Tyco’s shareholders. Tyco’s security and electronics businesses would be combined as a fourth publicly traded company. Tyco expects to complete the first of these IPOs, Tyco Capital, in 2Q02, and then finish the rest of these transactions by the end of 2002. Each IPO, shareholder distribution, or sale will be subject to applicable regulatory approvals.

“This is a bold, shareholder value-driven plan that we believe will create extraordinary near- and long-term benefits for Tyco’s shareholders and bondholders, as well as for our employees and customers,” says L. Dennis Kozlowski, Tyco’s chairman and ceo.

Besides creating value for its shareholders, Tyco says it plans to use proceeds from the IPOs and the sale of its plastics business to eliminate at least $11 billion of debt. This is expected to help give each of the four new companies a strong balance sheet and a financial profile for each consistent with an “A” rating. There would be no material change in the capitalization structure of Tyco Capital, which presently has an “A” rating.

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