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Dealwatch: Tyco

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Published August 4, 2006 at 8:47 AM
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Tyco International Ltd. gave a flash of its former dealmaking self with two deals in as many weeks.

Aug. 3, the company agreed to sell its printed circuit group business to TTM Technologies Inc., for $226 million, just days after its purchase of Confluent Surgical Inc. for $245 million in cash on July 18. The deal was Tyco's largest acquisition in more than four years.

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STOCKING THE MEDICINE CABINET

With Confluent, Tyco takes on a company that focuses on making technology used in sprayable surgical sealants and anti-adhesion products designed to speed patient recovery.

  • Tyco will add the unit to its most profitable division, healthcare -- which generated $2.3 billion in income on $9.5 billion in revenue during the company's last fiscal year -- and add to its arsenal of advanced surgical instruments and supplies, respiratory care products, diagnostic imaging products, and needles and syringes, as well as generic pharmaceuticals.

In the recent past, Tyco has tried to bolster its healthcare unit with other deals, including last July taking Vivant Medical Inc., which develops a minimally invasive procedure used to treat cancers, for $66 million plus milestone payments of upwards of $35 million.

A HISTORY OF BULKING UP

In the world of M&A throughout the 80s and 90s, Tyco was known as the hunter that preyed on almost every kind of company.

  • By 2002, the company found itself bloated and in financial disarray from a heavy debt load amassed from its acquisitions and an accounting scandal ending with the resignation of Dennis Kozlowski.
  • The former CEO was eventually convicted and sentenced for between eight to 24 years for the misappropriation of Tyco funds.
  • With the hiring of Ed Breen as CEO in July 2002 , the Bermuda-based company changed its strategy and began divesting some of the companies it had struggled to digest during its aggressive dealmaking days.
  • In the last two and a half years, Tyco has shed more than 50 businesses with more than $2 billion in annual revenue.

THREE IS BETTER THAN ONE

In January, Tyco announced it would split itself into three independent companies:

  • healthcare;
  • electronics units; and
  • a combined fire, security and engineered products and services business.

Tyco believes its next evolution via a spinoff would give each of the separate entities the freedom to grow at its own pace. The healthcare division shows a lot of strength registering $2.3 billion in income on $9.5 billion in revenue. Meanwhile, the electronics division has been suffering through some difficulties because of its exposure to troubles in the automobile and telecom industries. Tyco has responded by closing 16 factories in its electronics division and the jury is out on how the division would do as a standalone company. Finally, Tyco's remaining businesses, mostly industrial-related units, will be the parent company.

  • Terms of the spinoff call for the electronics and health care units to separate from the parent through a tax-free stock dividend to shareholders.
  • The deals are expected to close first quarter 2007. --Gerald Magpily

Dealwatch executive summary

The Date

The Action
8.03.06 Tyco sells printed circuit group business.

7.18.06

Tyco buys Confluent Surgical.

1.13.06

Tyco plans spinoff.

12.20.05

Tyco closes the sale of its plastics division.

7.05.05

Tyco buys Vivant for $66 million.

3.29.04

Tyco sells Sonitrol.

7.25.02

Breen comes on as new CEO.

6.03.02

Kozlowski resigns as CEO.

Source: The Deal

 



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Comments

From: Udayan J. Parikh,

There is a typographical error regarding the sell of their plastic division. It's not 12/20/06, it should be 12/20/05.

Posted on: August 11, 2006 1:46 PM


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