Tyco Nixes Split, Plans CIT Deal
Tyco International recently announced that it will no longer be pursuing its plan to break the company into several publicly traded entities, which it had announced this past January.
The company’s chief executive officer, Dennis Kozlowski, called the breakup plan a mistake in an apology to Tyco’s shareholders. He also blamed a “post-Enron” climate for souring the breakup’s potential, as articles in the media over the last few months made comparisons between Tyco’s accounting practices and those of Enron.
Tyco’s stock value dropped by 20 percent immediately following the announcement, taking the total fall in value for the company this year to 65 percent. Tyco also posted a loss of nearly $2 billion at the end of the second quarter of this year.
The breakup plan had called for a separation of the company into four distinct units and a complete sale of the plastics division, but now the plastics division has been taken off the table and replaced with an initial public offering of the CIT Group finance unit. Tyco is looking for $7.5 billion from that deal, after paying $9.5 billion for CIT last June. —Darryl James
