January 16, 2006 Pembroke, Bermuda -- Passive electronic components manufacturer Tyco Electronics will become a standalone, publicly traded company, the result of a restructuring plan recently approved by the board of directors of Tyco International Ltd. The plan calls for separating the company's current portfolio of businesses into three separate, publicly traded companies: Tyco Electronics, Tyco Healthcare, and Tyco Fire & Security and Engineered Products & Services (TFS/TEPS).
According to a press release, 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 corporate governance standards. Tyco expects to complete the transactions during the first quarter of calendar 2007.
"In the past several years, Tyco has come a long way," comments Tyco chairman and CEO Ed Breen. "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."
According to the company, 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 CEO will be Tom Lynch, current president of Tyco's Engineered Products & Services segment. 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.
In the transaction, the parent 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.