Fire, flow control businesses to join

Friday, March 1, 2002

PEMBROKE, Bermuda-After buying up some of the larger fire firms in the industry the past few years, Tyco's fire business will become a standalone company coupled with Tyco's flow control business.

The joining of these two business units, which Tyco officials say have natural synergies, is part of Tyco International's plans to break into four separate companies by the end of this year.

Together fire protection and flow control reported revenues of $7.6 billion in 2001. That's second only in size to the electronic security business, with revenues of $17.6 billion for 2001.

"The fit between fire and flow is obvious. This is Tyco as you knew it pre-1997," said Dennis Kozlowski, chairman and chief executive officer of Tyco. "Our flow control businesses have long supplied the fire operation and virtually all its mechanical parts, from field pipes and valves to sprinkler pipes to sprinkler heads. And there are great similarities in manufacturing and purchasing between the production of dedicated fire products and flow control businesses."

The new company will be led by Jerry Boggess, who has run Tyco's fire business since 1989. Boggess will be chief executive officer, while Jack Guarnieri, senior finance executive within the flow control business, will be chief financial officer.

Those in the fire industry expect few changes now that fire and flow control will become its own company.

"The companies in that group were originally stand alone companies with very strong names in the industry," said Lee Devito, president of FirePro, a fire safety and consulting firm. "Tyco has always seemed to let the companies do what they do, so they've tended to stay very strong and have a good market presence."

Boggess said the fire business - made up of companies like design and install firm SimplexGrinnell, recently purchased FireMaster, systems engineer Ansul and fire detection company Wormal - have advantage over others in the industry. Many brands have been around for centuries, he said, while the fire install side has the benefit of economies of scale.

"Our business is operated in very fragmented industries and we have a substantial number of competitors," said Boggess. "This is an opportunity for us. The vast majority of these are comparatively small and regional rather than global players which gives us a real advantage in the market."

He said revenues are split fairly equally for both fire and flow control. About 23 percent of revenues are expected to come from the fire detection and protection side, while 18 percent will come from fire recurring revenue services. On the flow control end, 18 percent of revenues are generated from tube and conduit with 25 percent from valve and controls.