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Tyco to Break Into Four Companies

The company predicts $11 billion of debt reduction.

Tyco International


will separate into four different publicly traded companies through a series of initial offerings and spinoffs in a transaction it said will eliminate $11 billion in debt.

The company, which has come under pressure in recent weeks for its aggressive acquisition strategy, will break out its health care; fire and flow control; and financial services units as separate public companies and combine its security and electronics businesses as a fourth independent firm. Tyco will sell its plastics operations. (Read what Herb Greenberg has to say about Tyco's latest


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The company said the procedure will "unlock tens of billions of dollars of shareholder value" by creating companies "that will be more appropriately valued by the market."

The first of the IPOs will be Tyco Capital, which should be completed by the second quarter of 2002. All of the transactions are expected to be finished by the end of calendar 2002.

Among other concerns, Tyco had been facing growing nervousness on Wall Street about its balance sheet. In announcing the split-up, Tyco said the transaction would eliminate about $11 billion in debt and said "each company will have a strong balance sheet going forward."

Of particular concern has been the company's potential convertible bond obligation.

"Tyco intends to offer to repurchase the convertible bonds," it said in the release. "Those convertible bonds not repurchased will continue to be obligations of Security & Electronics. Appropriate provisions will be made under the terms of the indentures of the convertible bonds not purchased, which may include having them become convertible into an appropriate number of shares of each of the four public companies."