Post break-up, Tyco closely watched

Wednesday, August 1, 2007

PRINCETON, N.J. --With the June 29 spin-off of its health care and electronics division a done deal, analysts are watching Tyco International--parent company to ADT, DSC, and SimplexGrinnell--to see if acquisitions will follow.
The company recently took out a $500 million line of credit through Citibank to "support corporate purposes of Tyco and its subsidiaries," according to a June 21 SEC filing.
Paul Fitzhenry, Tyco spokesman, did not have any further comments on the line of credit. However, industry analyst Jack Mallon, managing partner of Mallon Associates, noted that taking a $500 million line of credit is not something a company does just as a matter of course: "The company's been in a holding pattern for the past three years. They have talked somewhat about acquisitions but haven't delivered in the security area."
Is that about to change? "Perhaps," Mallon said.
"The time is right [for expansion and acquisitions] and the opportunity is there," according to Mallon. Tyco may have secured the credit line for the purpose of starting a "more aggressive growth program," he said. He tempered this speculation, however, saying there may be "another factor, they may be contemplating some other capital expenditures."
Tyco's Fitzhenry gave some details on the spin-off of the health care division, called Covidien, and the electronics division, called Tyco Electronics. "There were two events on Friday [June 29]," Fitzhenry said. First, at the end of the day, shareholders of Tyco International were issued "one share of Tyco Electronics and one share of Covidien for every four shares of Tyco International," he said. And second, following the distribution, there was a reverse stock split of shares of Tyco International where every four shares became one share. "The reverse split did not impact either Tyco Electronics or Covidien," Fitzhenry noted.
On a different matter, no court action was taken as of July 12 on a lawsuit filed by Tyco International bondholders against the conglomerate (search "Tyco bondholders file lawsuit" at "The matter will be dealt with in court in due time and we'll see what the outcome of that process is," Fitzhenry said.