Thermo Electron to Turn Its 23 Diverse Businesses Into Three

The effort will undo years of Thermo Electron's business-building strategy.
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Updated from 2:38 p.m. EST

Industrial mega-conglomerate

Thermo Electron

(TMO) - Get Report

said Monday that it would undertake a huge effort to rein in a number of its businesses while selling some of them.

In a complex reorganization plan rife with acquisitions, divestitures and regroupings of more than 20 publicly traded, majority owned businesses, Thermo Electron plans to ultimately divide itself into three publicly traded entities. The shares of the new companies will fall into the hands of current Thermo Electron holders.

The effort to collect and regroup over 20 publicly traded companies into three will undo years of Thermo Electron's business-building strategy, which consisted mainly of inventing a new product or idea, building or acquiring a business to market it, then "spinning out" shares of the business to employees and the public while retaining a controlling stake.

Investors reacted favorably to the idea of simplifying Thermo Electron. Shares of the company were up 1, or 6%, at 17 1/4 by midafternoon Monday. (The stock closed up 1 1/16, or 6.54%, at 17 5/16.)

In recent years, Thermo Electron stock has languished as investors worried that its business plan had become too varied. Shareholders were also losing confidence in the company's old leadership, after it failed to move forward with a restructuring plan that was introduced in August 1998.

The company will retain its core measurements and detection devices business under the name Thermo Electron. It will spin off

Thermo Fibertek

, a maker of composite fiber materials and technologies for the pulp and paper industry, and will also spin off each of its medical devices companies into a single company, which hasn't been named yet.

Analysts said Thermo Electron's business-building strategy, once touted as a groundbreaking method for building a conglomerate, caused the company to grow unweildy, as it competed in more than 20 diverse industrial markets from laser hair removal to bio-pesticides.

"In a way, this is a sort of 'independence day' for these companies," said Dennis Jean-Jacques, special situations analyst at

Franklin Mutual Funds

. "In the past, this strategy of creating and spinning off businesses made financial sense. But it got carried away, and the company found itself competing in too many markets."

The effort to sift and sort the businesses is the brainchild of Richard F. Syron, who became chief executive of Thermo Electron in June 1999 after serving as chief executive of the

American Stock Exchange

. In December, Syron also became the company's chairman after major shareholders pressured the company to replace the company's founder and chairman, Dr. George N. Hatsopoulos.

The company says it plans to complete the bulk of the transactions by January 2001.

Each of the three new companies to be carved out of the current Thermo Electron empire is expected to be formed by merging various companies that compete in similar markets.

The new Thermo Electron, a single publicly traded entitity, will make measurement and detection equipment for life sciences, telecommunications, process control, laser, optical, temperature control and environmental markets.

The companies that will constitute the new Thermo Electron include

Thermedics Detection

(TDX)

and

Thermo Sentron

(TSR)

.

Thermo Instrument Systems

(TMI)

will also be spun into the new company, as well as its subsidiaries

Thermo Optek

(TOC)

,

ThermoQuest

(TMQ) - Get Report

,

Thermo BioAnalysis

(TBA)

,

ONIX Systems

(ONX)

,

ThermoSpectra

(THS) - Get Report

,

Metrika Systems

(MKA)

, and

ThermoVision

(VIZ)

.

Thermo Electron will spin off

Thermo Fibertek

(TFT)

, another separate publicly traded company. The company will focus on process technologies for the pulp and paper industry and materials based on composite fibers, and will be made up of existing Thermo Fibertek holdings, including subsidiary

Thermo Fibergen

(TFG)

.

A third yet unnamed company will focus medical products in the neurodiagnostic, respiratory, and pulminary care products. That business will be made up of

Thermedics

(TMD)

,

ThermoTrex

(TKN)

, and

ThermoLase

(TLZ)

.

The company has put up for sale several subsidiaries that do not fit any of the three new companies, including

Thermo Cardiosystems

(TCA)

,

Trex Medical

(TXM)

and

Thermo TerraTech

(TTT) - Get Report

.