After going through an extensive acquisition and diversification spree under the management of CEO Dennis Kozlowski, industrial conglomerate Tyco International
This time Tyco is splitting its business segments -- ADT residential security, flow control, and commercial and fire security -- into three different public companies. By fragmenting its segments, Tyco should be able to improve its operational efficiencies.
In an economy where many companies are splitting up, including Marathon Oil, ConocoPhillips
What does the shareholder get?
Tyco shareholders will receive tax-free stock dividends of the ADT residential and flow control business, after which Tyco shareholders will own 100% of the equity in each of the three companies. The combined dividend will be paid in line with the company's current payout of $0.25 per quarter.
A simpler business structure enables greater flexibility and more gains for the shareholders. Moreover, the small business units with leading positions in their fields might attract companies to acquire them.
The split is expected to cost the company $700 million, which should be partially offset by lower interest expenses in the future and provide the company with operational benefits.
The Foolish bottom line
The break-up of Tyco will increase product focus and should improve the performance of the existing units. The company's financial position looks good, too. I think shareholders will benefit from this change. Fools should keep a track on this stock. Click here to add Tyco Industries to My Watchlist.