A Medical Device Daily
Tyco International (Schaffhausen, Switzerland) reported that its board has unanimously approved a plan to separate the company into three independent, publicly traded companies.
Tyco said the split would allow its three businesses – ADT North America residential security, flow control products and services, and its fire and security business – to have more options for growth, both from within and through acquisitions.
Tyco said it expects to complete the transaction in about 12 months, with transaction costs at about $700 million, mainly for debt refinancing, separation and restructuring.
“Over the last four years, we have strengthened our competitive position in our core security, fire and flow control businesses by driving organic growth, investing in R&D and technology, increasing efficiency and productivity and making strategic acquisitions,“ said Tyco Chairman and Chief Executive Officer Ed Breen. “Today, each business is in a strong financial position and has exceptional brands, highly skilled employees and talented, experienced leadership.“
“In carefully evaluating the opportunities for these businesses and for Tyco as a whole, the Tyco board of directors concluded that creating three independent, public companies is the next logical step for Tyco,“ said Breen. “All three companies will have industry-leading positions in large and fragmented industries and enhanced capabilities to serve their distinct customers. Importantly, the new standalone companies will have greater flexibility to pursue their own focused strategies for growth – both organic and through acquisitions – than they would under Tyco's current corporate structure. This will allow all three companies to create significant value for shareholders.“
This latest move to split up the company is one of a series of recent move aimed at slimming down the conglomerate and maximizing shareholder value. In 2007, Tyco spun off its electronics division, now called TE Connectivity (Schaffhausen), and the healthcare company now named Covidien (Mansfield, Massachusetts) (Medical Device Daily, July 6, 2007).
Upon completion of the transaction, it is contemplated that Breen will become non-executive chairman of the commercial fire and security company, a director of the flow control company, and a consultant to the ADT North America residential company. In addition, current Tyco directors are expected to serve on the boards of each of the three companies, including the roles of non-executive chairman of the flow control company and the ADT North America residential company.
“We will have strong leadership teams at the board and management levels of all three companies, enabling each business to take full advantage of the attractive growth opportunities that lie ahead,“ said Breen.
he ADT North America residential business, which provides security and fire alarm systems in North America to more than 6 million homes and small businesses, will have an annual revenue of about $3 billion and 16,000 employees.
Plans call for it to be incorporated in the United States. Naren Gursahaney, president of the security solutions segment, will become chief executive.
The flow control business, with annual revenue of about $4 billion and 15,000 employees, will be headed by Patrick Decker, who is now president of that segment.
Tyco expects the segment, which sells valves and controls for the energy and other markets, to be incorporated outside the U.S.
The company will combine the remaining commercial security business with the fire protection segment to form the largest new company, with annual revenue of $10 billion and 69,000 employees.
Tyco's commercial fire protection business sells fire detection and suppression systems, while the security business serves commercial, industrial and governmental customers. The president of Tyco's fire protection unit, George Oliver, will become the CEO of commercial fire and security.
Tyco's Swiss incorporation makes a break-up more tax-efficient than a sale, said analyst Jeff Sprague of Vertical Research Partners, but the individual pieces could be attractive to a long list of acquirers.
“We see all three pieces as possible takeover candidates,“ Sprague said.
In other dealmaking news:
• ConvaTec (Skillman, New Jersey), the wound-treatment maker owned by Nordic Capital and Avista Capital Partners, has reportedly abandoned an offer to acquire Kinetic Concepts (KCI; San Antonio).
In August, ConvaTec made an offer for Kinetic that surpassed a previous $6.5 billion bid from a group led by London-based buyout firm Apax Partners (MDD, Aug. 23, 2011).
Kinetic, which generated about 70% of its $2 billion in revenue from the wound-treatment business last year, also makes hospital beds and tissue-regeneration products used in surgeries.
Apax Partners and Canadian pension funds agreed in July to buy Kinetic for about $6.5 billion, including assumed debt, and said they would borrow as much as $5 billion to do so. Bank of America, Credit Suisse Group and Morgan Stanley are helping finance the deal.
• Concentra (Addison, Texas), a subsidiary of Humana (Louisville, Kentucky) reported that it has expanded its customer base and reach in the Atlanta market with the acquisition of NextCare's (Mesa, Arizona) four urgent care medical centers.
Following completion of the transaction, Concentra now has 15 centers in the Atlanta market, with two NextCare medical centers in Kennesaw and Mableton operating as Concentra Urgent Care respectively. These centers offer occupational and urgent care services, as well as preventive, wellness, and health education services to current and new patients and employers. The operations of two other acquired NextCare medical centers were consolidated into Concentra Urgent Care's existing centers in the area.
Existing patients of NextCare will have increased access to quality and convenient health services through a network of Concentra Urgent Care locations in Atlanta.
Concentra, through its affiliated clinicians, provides occupational medicine, urgent care, physical therapy, and wellness services from more than 310 medical centers in 40 states.