WHITE PLAINS, N.Y. (AP) â¿¿ ITT Corp., a company that began making telephone equipment in 1920 and grew into a massive conglomerate, said Wednesday it will split itself into three publicly traded companies.

The White Plains, N.Y., company that makes products ranging from brake pads to night vision goggles said the breakup would create an industrial products business, another focused on defense and information solutions and a third company making water technology products. ITT expects the division to be complete by the end of the year.

It said it was making the split in hopes that its shareholders would find the three businesses are more valuable as separate companies. Steve Loranger, ITT chairman, president and chief executive, said the board felt it was time to "unlock the value" of the three businesses, which he said each have leading products and market positions, skilled employees and value-generating potential.

"Each new company will be more nimble and able to build stronger, more intimate customer relationships to accelerate mutual success," he said in a statement.

The market applauded the plan. ITT shares climbed $8.72, or 16.5 percent, to close at $61.50, having risen to a 52-week high of $64 earlier in the session.

ITT is following a route that's become increasingly popular for conglomerates. In 2007, scandal-plagued Tyco International Ltd. transitioned from an unwieldy conglomerate into three separate, public companies, while kitchen and bath products company American Standard also broke into separate pieces. More recently, Motorola Inc., the 82-year-old consumer electronics pioneer, just this month split into two companies. And consumer products maker Fortune Brands Inc. announced plans in December to split into three companies, keeping its liquor business led by Jim Beam bourbon while shedding the units that make Titleist golf balls, Moen faucets and Master Locks.

ITT's stock had been hampered by the company's defense division, which accounts for about half its annual revenue but has relatively dim prospects because of upcoming defense budget cuts, said MorningStar Inc. analyst Anil Daka. The water division, meanwhile, looks rosy as states and municipalities invest in aging infrastructure that dates back to World War II.

"As the population grows, the demand for clean water only becomes that much more going forward," Daka said.

The markets priced ITT's defense division at about 10 times the value of its annual sales, Daka said. That pulled down the company's overall stock value to about 11 times its annual revenue, even though it should be trading at around 15 times the value when the water business is factored in, he thinks.

ITT's split would be the second major breakup in the company's 90-year history. In 1995, ITT divided its massive operations into three parts: its hotel and gaming business, insurance and its manufacturing companies.

ITT got its start in 1920 as the Puerto Rico Telephone Co. Created by the brothers Sosthenes and Hernand Behn, the company set a goal of building the first comprehensive global system of telephone lines. In the 1960s and 1970s, the company went on an acquisition binge, buying another company as often as once a week. In just 10 years, it grew from a medium-sized business with $765 million in annual sales to a conglomerate with yearly sales of $17 billion.

By 1977, the company had acquired more than 350 companies including Sheraton hotels, Avis Rent-a-Car and the maker of Wonder Bread. Under CEO Rand Araskog, it began a restructuring that led to the 1995 split.

In explaining the move announced Wednesday, ITT said its engineered products division, which makes valves and pumps for everything from planes to food production lines, will keep the ITT name. That business also makes products for the oil and gas, mining, chemical power, and pulp and paper industries. ITT's Chief Financial Officer Denise Ramos will be CEO of that company. It expects that business to have about $2.1 billion in revenue this year.

The water technology business will include ITT's residential and commercial water, flow control and wastewater businesses, which makes products used in water transport, testing, and treatment. Gretchen McClain, the president of ITT's fluid and motion control business, will be the CEO of the new company.

The business is expected to report $3.6 billion in revenue in 2011.

The third company is ITT's biggest â¿¿ its defense and information solutions business. That unit makes a wide range of defense products from night vision technology to satellite imaging. David Melcher, the president of the business, will become the company's CEO, and ITT director Ralph Hake will become chairman of the board.

ITT forecasts the defense business will have about $5.8 billion in revenue for the year.

The separations will be tax free spinoffs. ITT said its board of directors has approved the plan. Its shareholders will own stock in all three companies once the plan is complete.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.