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Tyco Investors Not Free From Kozlowski

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Meanwhile, employees and investors are still suffering from Kozlowski- era deals. Tyco IPO'ed a 14% stake in its telecommunications unit TyCom for $32 a share in 2000, but bought the company back with Tyco stock for $15.42 a share a year later. Unfortunately, TyCom shareholders got 0.31 Tyco shares at a value of nearly $50 for each of their shares. Tyco's 2007 split at $33.79 made TyCom shares worth closer to $10, a near 70% loss.

Investors in a $2.2 billion May 2001 Tyco secondary share offering at $56.50 are also smarting from a near 40% loss.

Those losses can be taken as the lingering impact of Kozlowski even as optimism on the earnings of spun entities abounds on a 2012 share rally.

Wednesdays spin and merger with Pentair, will give Tyco investors an over 50% stake in what's set to be an industrial pump and valve powerhouse worth nearly $10 billion. Meanwhile, investors are also likely to benefit from a recently announced Covidien breakup that will further dismantle the Tyco empire in what could yield at least seven companies. While not the breakup of Standard Oil, the effort is impressive nonetheless.

"We continue to believe TYC management is focused on maximizing shareholder value," wrote Credit Suisse analyst Julian Mitchell in a note reacting to Wednesday's announcement. Tyco is expected to continue with spinoffs, in a separation of its ADT security unit and its fire safety unit. "We reiterate our "outperform" rating as we see further potential M&A catalysts," adds Mitchell, who gives Tyco shares a $60 price target.

Wednesday's deal may also be beneficial for other spinoffs previously announced by Tyco. "We believe the preemptive divestiture of Tyco Flow prior to the spin bodes well for the takeout prospects of ADT and Comm'l Fire," wrote Citigroup analyst Deane Dray in a note upgrading Tyco shares to a price target of $63 from $57.

Analysts are optimistic about the growth prospects of other Tyco components. There isn't a single "sell" rating for any standalone pieces of the former Tyco empire, according to Bloomberg compilations of consensus analyst estimates. Tyco gets 12 "buy" ratings and 7 "holds" and a price target of $57, while TE Connectivity warrants 12 "buys," just 2 "holds" and an average price target of $39.82. Meanwhile Covidien shares warrant a price target of $59.47 on 20 "buy" ratings and 3 "holds," according to Bloomberg data.

See 5 short sighted stock spinoffs for more on corporate breakups. For more on spinoff speculation in the healthcare sector, see why Goldman Sachs thinks Pfizer needs to think about a breakup.

-- Written by Antoine Gara in New York.
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