Tyco Announces Intent to Separate Into Three Publicly Traded Companies
January 13 2006 - 6:00AM
PR Newswire (US)
PEMBROKE, Bermuda, Jan. 13 /PRNewswire-FirstCall/ -- Tyco
International Ltd. (NYSE:TYC)(BSX:TYC) today announced that its
Board of Directors has approved a plan to separate the company's
current portfolio of diverse businesses into three separate,
publicly traded companies - Tyco Healthcare, one of the world's
leading diversified healthcare companies; Tyco Electronics, the
world's largest passive electronic components manufacturer, and the
combination of Tyco Fire & Security and Engineered Products
& Services (TFS/TEPS), a global business with leading positions
in residential and commercial security, fire protection and
industrial products and services. 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
independent Board of Directors and strong corporate governance
standards. Tyco expects to complete the transactions during the
first quarter of calendar 2007. According to Tyco Chairman and
Chief Executive Officer Ed Breen, "In the past several years, Tyco
has come a long way. Our balance sheet and cash flows are strong
and many legacy financial and legal issues have been resolved. We
are fortunate to have a great mix of businesses with market-
leading positions. After a thorough review of strategic options
with our Board of Directors, we have determined that separating
into three independent companies is the best approach to enable
these businesses to achieve their full potential. Healthcare,
Electronics and TFS/TEPS will be able to move faster and more
aggressively -- and ultimately create more value for our
shareholders -- by pursuing their own growth strategies as
independent companies." Tyco's Board of Directors and senior
leadership have evaluated a broad 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 these market-leading
companies for sustained growth and value creation. Three Leading
Global Companies TYCO HEALTHCARE With 2005 revenue of nearly $10
billion, Tyco Healthcare is one of the foremost global providers of
healthcare products and services. The company is well-positioned to
capitalize on the attractive dynamics of the healthcare industry
and to realize more robust growth. Its product portfolio includes
advanced surgical instruments and supplies, respiratory care
products, contrast media and diagnostic imaging products, needles
and syringes, vascular therapies, sutures and wound care products,
and generic pharmaceuticals. Healthcare has more than 40,000
employees. This proposed separation will create a leading
stand-alone healthcare company, which is expected to benefit from a
focused and independent healthcare culture to help attract top
industry talent and strategic partners, as well as increasing
access to emerging healthcare-related technologies. This business
will continue to be led by current Tyco Healthcare President Rich
Meelia, who will become the company's Chief Executive Officer.
Chief Operating Officer Kevin Gould and Chief Financial Officer
Chuck Dockendorff will also continue in their current leadership
positions with the company. TYCO ELECTRONICS Tyco Electronics is
one of the world's largest suppliers of electronic components,
including connectors, switches, relays, circuit protection devices,
touch screens, magnetics, resistors, wire and cable, as well as
fiber-optic and wireless components and systems. Electronics has
88,000 employees worldwide. As a $12 billion stand-alone
enterprise, Tyco Electronics will be positioned to move quickly and
strategically as competition requires, and will be better able to
participate in ongoing electronics industry consolidation. The
company's Chief Executive Officer will be Tom Lynch -- current
President of Tyco's Engineered Products & Services segment --
who brings broad experience in the communications and electronics
industries. Dr. Juergen Gromer, who has led Tyco Electronics since
1999, will continue as President, and will also assume additional
responsibilities as Vice Chairman. Jacki Heisse will continue to
serve as the company's Chief Financial Officer. TYCO FIRE &
SECURITY/ENGINEERED PRODUCTS & SERVICES TFS/TEPS will be led by
Tyco International Chairman and CEO Ed Breen as well as Tyco
International's Chief Financial Officer, Chris Coughlin. TFS/TEPS
is an $18 billion world leader in electronic security solutions for
residential, business, and governmental customers, fire protection
and sprinkler systems, and industrial valves and controls. With
more than 118,000 employees, TFS/TEPS has a large, stable recurring
revenue base and generates strong cash flow. Dave Robinson will
continue to serve as President of Tyco Fire & Security. Naren
Gursahaney will succeed Tom Lynch as President of Engineered
Products & Services. Breen added, "We believe this separation
is a logical next step in Tyco's evolution and we are absolutely
convinced that this is the right decision for the long-term success
of our businesses, employees and shareholders." Transaction Details
It is anticipated that all three companies will be capitalized to
provide financial flexibility to take advantage of future growth
opportunities. They are expected to have financial policies,
balance sheets and credit metrics that are commensurate with solid
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 is expected to be allocated among the three companies
or refinanced. Any existing or potential liabilities that cannot be
associated with a particular entity will be allocated appropriately
to each of the businesses, and a sharing arrangement among the
three companies will be established. The three entities together
are initially expected to pay a dividend that is equal in sum to
the current Tyco dividend. Until the planned transactions are
completed, Tyco expects to pay its current quarterly dividend of
$0.10 per share. One-time transaction costs are expected to total
approximately $1.0 billion -- largely for tax and debt refinancing.
Under the proposed transaction structure, each of the companies is
expected to remain incorporated in Bermuda. Consummation of the
proposed separations is subject to certain conditions, including
final approval by the Tyco International Board of Directors,
receipt of a tax opinion of counsel, and the filing and
effectiveness of registration statements with the Securities and
Exchange Commission. The separations are also subject to the
completion of any necessary refinancings. Approval by Tyco
International shareholders is not required. First Quarter and
Full-Year 2006 Update Tyco expects first quarter 2006 earnings per
share (EPS) from continuing operations -- excluding special items
-- to be about $0.38 per share compared to its previous guidance of
$0.40 to $0.42 per share. Organic growth will be approximately 4
percent for the quarter, with 7 to 8 percent organic growth in
Electronics and Engineered Products & Services partially offset
by flat organic growth in Fire & Security and Healthcare. In
Fire & Security, revenue and margins were adversely impacted by
weakness in the commercial security and Worldwide Fire Services
businesses, partially offset by improved performance in residential
security. In Healthcare, strong growth in revenue and operating
profit in International was offset by revenue and profit shortfalls
in the Imaging and Respiratory businesses, primarily due to the
impact of product recalls and regulatory compliance issues, as well
as capacity limitations in the Pharmaceuticals business. The issues
in Imaging and Respiratory have been identified and are in the
process of being resolved. The company expects to have additional
pharmaceutical capacity coming on-line in the second quarter. For
the full year 2006, the company is now expecting EPS from
continuing operations excluding special items to be in the range of
$1.85 to $1.92 per share. The change from the company's previous
guidance is mostly due to the items in Fire & Security and
Healthcare noted above. The estimated transaction costs related to
the separations will be treated as special items and are therefore
excluded from this guidance. EPS from continuing operations
excluding special items and organic revenue growth are non-GAAP
financial measures and are described below. As previously
announced, the company will release its full first quarter results
on Feb. 2, 2006. About Tyco Tyco is a global, diversified company
that provides vital products and services to customers in five
business segments: Fire & Security, Electronics, Healthcare,
Engineered Products & Services, and Plastics & Adhesives.
With 2005 revenue of $40 billion, Tyco employs approximately
250,000 people worldwide. More information on Tyco can be found at
http://www.tyco.com/. CONFERENCE CALL AND WEBCAST The company will
hold a conference call for investors today beginning at 10:00 a.m.
ET. The call can be accessed in two ways: -- At Tyco's website:
http://investors.tyco.com/. A replay of the call will be available
through Tues., Jan. 31, 2006 at the same website. -- By telephone:
For both "listen-only" participants and those participants who wish
to take part in the question-and-answer portion of the call, the
telephone dial-in number in the United States is (877) 531-2987.
The telephone dial-in number for participants outside the United
States is (612) 332-0819. An audio replay of the conference call
will be available beginning at 3:15 p.m. ET on Fri., Jan. 13, 2006
and ending at 11:59 p.m. ET on Fri., Jan. 20, 2006. The dial-in
number for participants in the United States is (800) 475-6701. For
participants outside the United States, the replay dial-in number
is (320) 365-3844. The replay access code for all callers is
814596. NON-GAAP MEASURES "EPS from continuing operations excluding
special items" and "organic growth" are non-GAAP measures and
should not be considered replacements for GAAP results. The company
has forecast its EPS from continuing operations results excluding
special items related to divestitures, early retirement of debt,
transaction costs related to the separations, and other income or
charges that may mask the underlying results and trends and make it
difficult to give investors perspective on underlying business
results. Because the company cannot predict the amount and timing
of such items and the associated charges or gains that will be
taken, it is difficult to include the impact of those items in the
forecast. "Organic revenue growth" is a useful measure used by the
company to measure the underlying results and trends in the
business. The difference between reported net revenue growth (the
most comparable GAAP measure) and organic revenue growth (the
non-GAAP measure) consists of the impact from foreign currency,
acquisitions and divestitures, and other changes that do not
reflect the underlying results and trends (for example, revenue
reclassifications and changes to the fiscal year). Organic revenue
growth is a useful measure of the company's performance because it
excludes items that: i) are not completely under management's
control, such as the impact of foreign currency exchange; or ii) do
not reflect the underlying growth of the company, such as
acquisition and divestiture activity, or revenue reclassification.
It is also a component of the company's compensation programs. The
limitation of this measure is that it excludes items that have an
impact on the company's revenue. This limitation is best addressed
by using organic revenue growth in combination with the GAAP
numbers. FORWARD-LOOKING STATEMENTS This release may contain
certain "forward-looking statements" within the meaning of the
United States Private Securities Litigation Reform Act of 1995.
These statements are based on management's current expectations and
are subject to risks, uncertainty and changes in circumstances,
which may cause actual results, performance or achievements to
differ materially from anticipated results, performance or
achievements. All statements contained herein that are not clearly
historical in nature are forward-looking and the words
"anticipate," "believe," "expect," "estimate," "plan," and similar
expressions are generally intended to identify forward-looking
statements. The forward-looking statements in this release include
statements addressing the following subjects: future financial
condition and operating results. Economic, business, competitive
and/or regulatory factors affecting Tyco's businesses are examples
of factors, among others, that could cause actual results to differ
materially from those described in the forward-looking statements.
Tyco is under no obligation to (and expressly disclaims any such
obligation to) update or alter its forward-looking statements
whether as a result of new information, future events or otherwise.
More detailed information about these and other factors is set
forth in Tyco's Annual Report on Form 10-K for the fiscal year
ended Sept. 30, 2005. DATASOURCE: Tyco International Ltd. CONTACT:
Sheri Woodruff of Tyco International Ltd., +1-609-720-4399, ; or
Investor Relations, Ed Arditte, +1-609-720-4621, or John Roselli,
+1-609-720-4624, or Karen Chin, +1-609-720-4398, all for Tyco
International Ltd. Web site: http://www.tyco.com/
http://investors.tyco.com/ Company News On-Call:
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