Tyco to buy AT&T's undersea fiber-optic cable unit

April 12, 1997|By BLOOMBERG NEWS

EXETER, N.H. -- Tyco International Ltd. said it will buy AT&T Corp.'s undersea fiber-optic cable unit for $850 million in cash, adding installation services to its cable-making business.

The business consists mainly of Submarine Systems Inc., which buys and installs most of the undersea cable produced by Tyco's Simplex Technologies unit. Submarine Systems is expected to have 1997 revenue of $1 billion.

Tyco, which makes everything from industrial valves to medical bandages, has fueled its growth by buying competitors, targeting companies for their potential to immediately add to earnings. Investors have rewarded this strategy, driving Tyco's stock price up 73 percent to a record $61.75 last month, from $35.75 a year earlier.

"This is an excellent example of how Tyco searches for revenue growth opportunities," said Dale Dutile, investment officer of Massachusetts Financial Services, which holds about 4.6 million Tyco shares. "They've been extremely successful."

Tyco's stock fell 50 cents to $57.75 yesterday. AT&T fell 87.5 cents to $33.625.

The acquisition of AT&T's business is typical of Tyco, Dutile said. It gives the company a new capability to install cables in a market where supply can't keep up with demand and frees Tyco from contractual obligations that made AT&T its only commercial customer, letting it seek new clients.

"They have a fairly consistent strategy of entering or acquiring businesses that have potential growth possibilities," he said.

Tyco in March agreed to purchase electronic security firm ADT Ltd. in a transaction valued at about $5.38 billion, based on Tyco's closing price yesterday. A month earlier, it unveiled the purchase of American Tube & Pipe Co. for an undisclosed amount.

Tyco said demand for undersea cables is "rapidly outstripping current capacity" because of strong international phone, fax and data traffic, as well as a growing market for Internet services.

"The combination makes Tyco the world's only fully integrated single source for everything from cable system design to manufacturing to installation and maintenance," said L. Dennis Kozlowski, chairman and chief executive, in a statement.

He said the acquisition will have "an immediate positive impact" on earnings. He wasn't more specific.

Fueled by acquisitions, Tyco's annual revenue has increased rapidly in recent years, to $5.09 billion in fiscal 1996 from $3.07 billion in 1992.

Pub Date: 4/12/97

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