Well, it’s official now as Tyco’s (TYC) shareholders approved the latest dismemberment of the former conglomerate earlier this week. I’m still waiting for a shareholder surprise veto to take place…now that would be something. Anyways…continuing its long history of spins, Tyco will distribute its North American ADT business and its flow control business on September 28th to shareholders as of September 17th. ADT is expected to trade on the NYSE under the ticker ‘ADT’ and shareholders of TYC will receive one share of ADT common stock for every two shares of TYC owned.
The other part of the transaction isn’t so simple though as immediately following the spin, Pentair Inc (PNR) will merge with and into the flow control business. The new ‘flow control business’ will subsequently be renamed Pentair Ltd and trade under the ticker ‘PNR’, which just so happens to be Pentair’s current ticker. The number of shares of Flow Control common stock received by TYC shareholders will be determined by a formula based on the number of Pentair and Tyco shares outstanding on the distribution date, but the distribution ratio is expected to be ~0.24 Flow Control shares for each share of TYC owned. Pentair’s current shareholders will receive 1 share of the new ‘flow control business’ for every share of Pentair owned and in total, they are expected to own 47.5% of the new company with TYC shareholders owning the rest. Putting it all together, according to the company, TYC will distribute ~231 million shares of ADT common stock and ~111 million shares of Flow Control common stock.
The company also provided some negative guidance for its Fire & Security segment. Due to AR collection issues in China, the company will record a charge and reduced revenue guidance by ~$25m with operating margins of 11.2-12%. It had previously predicted revenue of $2.75b and operating margins around 13.5%. The margins are also expected to be lower than forecasted for its ADT North American Residential and Small Business segment.
According to Insider Monkey, a number of prominent hedge funds have bought into Tyco, but that doesn’t really mean anything. We will keep you updated as this transaction progresses.
Disclosure: Author holds no position in any stock mentioned.