TYCO International Ltd. (TYC)

Special Conference Call

September 19, 2011, 10:00 am ET


Antonella Franzen – Vice President of Investor Relations

Edward D. Breen – Chairman & Chief Executive Officer

Frank Sklarsky – Executive Vice President & Chief Financial Officer


Jeffrey Sprague – Vertical Research Partners

Steven Winoker – Sanford Bernstein

Stephen Tusa – JPMorgan Chase & Co.

Deane Dray – Citi Investment Research

Gautam Khanna – Cowen & Co.

Brian Langenberg – Langenberg & Co.

Ajay Kejriwal – FBR Capital Markets

Shannon O’Callaghan – Nomura Securities International, Inc.



Welcome to the Tyco proposed plan to separate into three independent, publicly traded companies. All lines have been placed on listen-only (Operator Instructions). Today’s conference is being recorded. If you have any objections please disconnect at this time.

I will now turn the call over to Antonella Franzen, Vice President of Investor Relations. You may begin.

Antonella Franzen

Good morning, and thanks for joining our conference call to discuss our proposed plan to separate Tyco into three independent publicly traded companies as announced earlier this morning. With me today are Tyco's Chairman and Chief Executive Officer, Ed Breen, and our Chief Financial Officer, Frank Sklarsky.

Let me remind you that during the course of the call we will be providing certain forward-looking information. We ask that you look at the press release and read through the forward-looking cautionary informational statements that we’ve included there. The press release issued this morning as well as the conference call slides can be found on the investor relations portion of our website at Tyco.com.

The discussions during today’s call will be addressed in a proxy statement to be filed with the Securities and Exchange Commission. Before making any voting decisions investors are urged to read the proxy statement regarding the proposed separation and any other relevant documents carefully in their entirety when they become available because they will contain important information about the proposed separation. Brief copies of the proxy statement, when available, and other documents filed with the SEC by Tyco can be obtained through the SEC’s website as well as Tyco’s website.

Just as a note, we will hold our fourth-quarter earnings conference call on Wednesday November 16. We ask you to please understand that the purpose of today’s call is to discuss the proposed separation of Tyco. We will limit our comments on the fourth quarter to the information we have provided in today’s press release, and I ask you to hold your question on the quarter's operating results until the November 16 call.

Now, let me turn the call over to Ed, to discuss today’s announcement.

Edward D. Breen

Great. Thanks, Antonella, and good morning, everyone. I am very pleased to announce that our Board of Directors has unanimously approved the proposed plan to separate Tyco into three independent, publicly traded companies. The three industry-leading companies created through the separation will be the ADT North America Residential security business, the Flow Control business and the combined Fire Protection and Commercial Security business. The separation will be achieved through tax-free stock dividends to our shareholders. Upon distribution of the stock dividends, Tyco’s then-current shareholders will own 100% of the stock of each of the three entities.

Tyco’s senior management and the board have continuously reviewed a variety of strategic alternatives to determine what structure will best position our businesses to create long-term shareholder value. After extensive review, the board and management have determined the best way for us to maximize long-term shareholder value is to separate Tyco into the three standalone companies. Each of these companies will have industry-leading positions in large fragmented and growing markets with strong leadership teams and the resources to pursue their own strategies.

Let me spend a few minutes on the strategic rationale for this announcement. In the four years since Tyco’s 2007 separation, we have continued to grow our businesses organically through investments in R&D and new technologies and have improved our global operations by increasing productivity and implementing efficiency initiatives. We have also refined our portfolio of assets through the completion of several acquisitions that have strengthened our market positions globally as well as through the divestiture of certain non-core businesses.

While there are still opportunities to improve our operations, we believe that we have now reached a point where the future growth potential of our businesses can best be realized through the creation of three, independent, standalone companies. These businesses operate with very distinct business models, each with different capital investment needs and growth profiles. Additionally, each business provides products and services tailored to specific customers with very little overlap and each operates in different end markets. We firmly believe that these businesses can best achieve their full potential as standalone, independent companies rather than under the current Tyco structure.

The ADT North America Residential business is a consumer, subscriber-based business with capital requirements and operating characteristics that are very different from a traditional manufacturing and service business. As the standalone residential monitoring company, ADT will be a focused pure play industry leader. With an appropriate capital structure, ADT will have greater flexibility to deploy its free cash flow whether it is investing organically in new products such as ADT Pulse, strengthening its sales and service teams to grow its customer base, drive higher revenue per user, and lower attrition rates or returning capital directly to shareholders.

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