Schneider Tyco saga continues" NY Post says deal not dead

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05/16/2011

The Schneider/Tyco deal, rumors of which first surfaced about a month ago, is not dead, according to the New York Post.

Just before midnight last Thursday the Post reported that Schneider Electric is talking to to private-equity firms about partnering on a $30 billion-plus bid for Tyco International. The report cited “two sources close to the situation.”

The NYPost said Schneider is in the process of choosing which PE firms to work with. Schneider’s plan, according to the Post, is to split Tyco’s assets, keeping the fire and security businesses (ADT and SimplexGrinnell make up the biggest parts of those two units) and ditching the flow control unit and part-ownership Tyco still has in has its electrical and metal units, (most of which was sold to last year for $713 million to PE firm Clayton, Dubilier & Rice. ) Tyco split into three separately traded companies in 2007.

The Post also says that “several PE firms” may go it alone and make their own offer for Tyco.

The Post story, and several other news outlets which cited the New York Post report, noted the Schnieder denies that it was in talks with Tyco or even interested. On April 20 on Schneider CEO Jean-Pascal Tricoire said"There is no plan of large-sized acquisitions now and in the foreseeable future.”

But the reports point to Tyco CEO Ed Breen’s comments during Tyco’s April 28 conference call as evidence that Tyco wouldn’t object to the bid. Here’s the blog I wrote after listening to this call.

Schneider issued another denial on Friday, May, 13. Here’s the Rueters report on that.

"Our CEO expressed himself clearly at the time of our earnings report on this topic and we have nothing to add," Schneider spokesman Anthime Caprioli said, according to the Rueters report.

Meanwhile, Tyco spokesman Paul Fitzhenry declined to comment.

From the Post story, here’s what analyst Brian Langenberg had to say:

“A private-equity firm would likely pay about eight times the flow control division's EBITDA, or $4.5 billion, he said. Schneider would likely have little interest, he added, in Tyco's 49 percent stake in its electrical and metal products business that it still holds after selling the rest of it last year for $713 million to PE firm Clayton, Dubilier & Rice. Tyco is in a cyclical downturn, making this a good time to buy and reap the benefits when revenue and earnings rebound along with the economy, Langenberg said. If Tyco begins a formal auction, Langenberg believes Siemens, which is rolling out a global cities platform, and United Technologies, whose head of business development used to run UTX's fire and security business, could take a look. "I don't think Tyco would go for less than $65 a share," he said."

Shares of Tyco were up on Friday. The last trade, according to Yahoo Finance was 50.78.

Finally, here’s a CNBC report that has options trader JJ Kinahan, talking about why he believes “unusual options activity on Tyco” on Friday suggests that no deal is on the table.

"When it's reported a company could be bought out, Kinahan said there are usually a lot of call buyers. But immediately following the Tyco report, there were a lot of put buyers. Options traders quickly bought the May 50 and June 49 puts when the stock was flirting with its highs early Friday. Traders are now buying the July 55/60 call spread, as well as the October 55/60 call spread.

This options activity suggests the takeover story will be short-lived, Kinahan explained. If the deal fades, it's going to fade quickly. So Kinahan said the options market doesn't put much merit into the takeover reports."