Previous Statements by TYC
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With me this morning are Randy Hogan, Chairman and CEO of Pentair, John Stauch CFO of Pentair, Ed Breen, Chairman and CEO of Tyco International, and Tyco’s Vice President of Investor Relations, Antonella Franzen.This morning Randy, Ed, and John, have prepared remarks regarding the Pentair and Tyco Flow Control transaction, followed by a Q&A session. The entire call is expected to last approximately one hour. And a replay of the call should be available later today. Before we begin, let me remind you that any statements made about the company’s anticipated financial results are forward-looking statements, subject to future risks and uncertainties. It is therefore possible that actual results may differ materially from any forward-looking statements that we might make today. The companies undertake no obligation to update publicly such forward-looking statements to reflect subsequent events or circumstances. Please review the cautionary language about forward-looking statements in the press release. Today’s webcast is accompanied by a presentation, which can be found through the Investor section of both company’s website. A reconciliation of non-GAAP to GAAP measures discussed in this call is contained in the appendix to such presentation. With that I‘ll now turn the call over to Pentair’s Chairman and CEO, Randy Hogan. Randall J. Hogan Thanks Sara, and good morning. I’ll start on page four. I’m excited to be here today with Ed and the Tyco team to discuss what we believe is a powerful combination that will create tremendous value for all our shareholders and our customers. By joining Pentair and Tyco Flow Control together, we will create a leader in the flow, filtration and equipment protection, with annual sales nearing $8 billion. The combined company will have increased scale, broader geographic reach and greater access to high growth attractive sectors. Building on the strength of both companies, we will be well positioned to benefit from the significant demands in energy, infrastructure, food and beverage, and water, resulting from the growing population of wealth of developing economies, what we refer to as the new, new world.
This transaction presents a unique opportunity to unlock immediate synergies. We have over $90 million in synergies right from the start through one corporate structure and greater tax efficiencies. We expect further cost savings, enhanced growth prospects and a stronger balance sheet to yield even more benefits going forward.By any measure, the new Pentair will be a stronger company with exciting platforms to future growth, and substantial value creation opportunities for all stakeholders. Let me take a moment to discuss of the transaction, that’s highlighted slide five. It’s roughly $10 billion stock-for-stock merger using a Reverse Morris Trust structure that will be tax free to shareholders of both companies. The combined company, which will be called Pentair will be domiciled in Switzerland, building on our existing presence there, where Tyco International is already incorporated. Our main offices will be continue to be in Minneapolis where Pentair’s executive team will be lead the new combined company. Financially, this transaction is very compelling. We expect the transaction to be highly accretive to earnings adding $0.40 to 2013 EPS with combined company EPS expected to be greater than $5 a share by 2015. This combined company should also deliver roughly $1.7 billion in EBITDA in 2015 and yield an even stronger balance sheet to continue to support investment in our businesses and return cash to shareholders. Now, we flip a slide and hand the call over to Ed Breen for few comments. Ed? Edward D. Breen Great, thanks Randy, and good morning everyone. I am pleased to be here with Randy and the Pentair team to discuss this transaction that clearly accomplishes what a merger should do, create significant value for the shareholders of both companies. Let me spend a few minutes telling you a little bit about the benefits it will bring to Tyco shareholders. Based on yesterday’s closing price of Pentair, this transaction values Tyco Flow at approximately $4.9 billion, which represents immediate value to Tyco shareholders. As you can see on slide seven, this value implies a 10.4 times EBITDA multiple for Tyco Flow on a standalone basis, before any additional value uplift from synergies generated from a combination with Pentair. These synergies are expected to provide Tyco shareholders with substantial incremental value immediately and over the longer term.
Now let me give you some background on this transaction. Last September, Tyco announced a plan to separate into three independent public companies through the tax free spin-off of the 80G, North America Residential Security business, and the Flow Control business. We are making very good progress in preparing for these spin-offs and continue to expect to complete these transactions along with the merger of Pentair into Tyco Flow at the end of September.Read the rest of this transcript for free on seekingalpha.com