Tyco plans breakup into 4 companies

`Absolutely surprising' move reverses course, and the shares rise $1.10

January 23, 2002|By BLOOMBERG NEWS

EXETER, N.H. - Tyco International Ltd., bowing to shareholder demands for greater transparency in accounting, said yesterday that it plans to split into four companies and shed $11 billion in debt.

"It's absolutely surprising," said Mark Demos, an analyst with Fifth Third Investment Advisors, which owns Tyco shares. "It goes against the grain of Tyco's message over the past decade."

The breakup reverses the strategy of Tyco chief executive L. Dennis Kozlowski, who oversaw $64 billion in acquisitions and whose methods were compared to those at General Electric Co. Kozlowski will head the electronics and security-systems company that remains after Tyco spins off its health care, fire protection and flow control, and financial services units.

Tyco was the subject of criticism from some analysts and investors who said the company manipulated its accounting for acquisitions to mask slowing growth in its business.

"Our job is to deliver shareholder value, not wait around to be vindicated," Kozlowski said during a press conference.

Enron Corp.'s accounting lapses and eventual failure may have forced Tyco to take the steps to boost its stock price after it lost $25 billion in market value since December, investors said. Proceeds from transactions and the sale of Tyco's plastics business will be used to repay some of the company's $79 billion in debt.

"A lot of people are suffering [because of] Enron," Kozlowski said in an interview after the press conference. "The thing that brought down Enron was rogue financing off the balance sheet. There's none of that at Tyco."

Tyco rose $1.10, or 2.4 percent, to $47.55. The stock of Tyco, which is based in Bermuda and run from Exeter, N.H., had dropped 21 percent this year.

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