nVenting About Pentair’s Electrical Spinoff

Every schoolchild is aware of the dangers of mixing water and electricity. Perhaps with this in mind, Pentair(PNR) will be spinning off its Electric division and retaining its Flow Control division. As every spinoff needs a gut-wrenchingly bad name with an even worse explanation of its meaning, the new company will be known as nVent Electric. Why?

Beth A. Wozniak, who will become Chief Executive Officer of nVent upon completion of the separation said, “The name ‘nVent®’ reflects the legacy of innovation across our portfolio of brands that will serve as the foundation for the new company as we execute on our mission to connect and protect our customers with inventive electrical solutions, create safer systems and ensure a more secure world. As a high-performance electrical company, nVent is focused on improving utilization, lowering costs and maximizing customer uptime.”

No word on how the creative capitalization furthers these lofty goals, but we’re sure that it has some esoteric and profound meaning.

Interestingly, Pentair is itself a spinoff, a legacy of the old Tyco complex and of Ed Breen, who is now working his spinoff magic at DowDupont(DWDP). Pentair merged with Tyco’s Flow Control business in 2012 in a Reverse Morris Trust transaction. nVent’s “Thermal Management business and the Raychem brand, a global leader in heat tracing solutions” came from Tyco.

Recently, nVent filed its initial Form 10, which can be found here.

“The filing of the Form 10 is yet another important milestone toward the completion of Pentair’s separation into two leading public companies,” said Randall J. Hogan, Pentair Chairman and CEO. “This is an exciting time for all of us at Pentair and nVent. We strongly believe that both companies are well positioned for long-term growth and value creation with the scale and strength to control their own destinies. The increased focus of both companies should help to raise the execution even further and drive higher differentiated growth.”

nVent will employ approximately 9,000 people globally, with its main U.S. offices in Minneapolis, Minnesota. nVent will have industry-leading positions in industrial, commercial, residential, energy and infrastructure. Brand names for nVent’s offering include CADDY, ERICO, Hoffman, Raychem, Schroff and Tracer. nVent’s revenues for the year ended December 31, 2016 were $2.1 billion.

Lest you be concerned, the company plans to continue to use PIMS. What is PIMS?

Our strategy and culture is grounded in the values and purpose of Pentair. From Pentair Integrated Management System (“PIMS”), we have derived a set of lean growth and talent management processes, designed to improve business performance, evaluate growth opportunities, and develop and retain employees. Through consistent application of these processes, we have been able to foster a culture of innovation, retain focus on the customer, and profitably grow our business. We will continue to use and improve these processes as an independent company to continue to drive sustained and profitable growth.

On a pro-forma basis, the company has had just under $300 million in Free Cash Flow the last two years. However, while current financials indicate no debt, the Form 10 suggests that the company will take on debt as part of this transaction. It remains to be seen how significant this will be. Without all the detail filled in, it is too early to fully assess the prospect of each of these businesses on their own.

Disclosure: The author holds no shares in any stock mentioned