Tyco International Ltd. is a highly diversified global manufacturing company incorporated in Bermuda, with United States operational headquarters in Princeton, New Jersey (Tyco International (US) Inc.). Tyco International is composed of five major business segments: ADT Worldwide, Fire Protection Services, Safety Products, Flow Control and Electrical and Metal Products.
In June 2007, Tyco concluded a corporate separation that split the company into three publicly independent companies: Covidien Ltd. (formerly Tyco Healthcare), Tyco Electronics Ltd and Tyco International Ltd. (formerly Tyco Fire & Security and Tyco Engineered Products & Services (TFS/TEPS))
Founded by Arthur J. Rosenburg, Ph.D. in 1960, Tyco, Inc. was formed as an investment and holding company with two segments: Tyco Semiconductors and The Materials Research Laboratory. In the first two years of operation, the company focused primarily on governmental experiments in the private sector.
In 1962, the business was incorporated in Massachusetts and refocused on high-tech materials science and energy conservation products. Two years later in 1964, the company went public and began to fill gaps in its development and distribution network by acquiring Mule Battery Products, the first of Tyco’s 16 acquisitions in the next four years.
In the 1970’s Tyco boomed, beginning the decade with consolidated sales and stockholder equity reaching $34 million and $15 million, respectively.
In 1972, Tyco was listed on the New York Stock Exchange (NYSE).
By the end of the decade, Tyco had a larger and more diverse corporation with sales topping $500 million and a net worth of nearly $140 million. Tyco’s success was largely attributed to ambitious acquisitions of Simplex Technology, Grinnell Fire Protection Systems, Armin Plastics and the Ludlow Corporation.
Following an aggressive acquisition period through the 1970s, Tyco management focused the early 1980s on organizing its newly acquired subsidiaries. Tyco divided the company into three business segments (Fire Protection, Electronics and Packaging), and implemented strategies to achieve significant market share in each of Tyco’s product lines.
Once organized, Tyco returned to the strategy of growth by acquisition in the later part of the decade acquiring Grinnell Corporation, Allied Tube and Conduit, and the Mueller Company. Tyco then again, reorganized its subsidiaries into four segments: Electrical and Electronic Components, Healthcare and Specialty Products, Fire and Security Services and Flow Control. This reorganization remained in place until 2007 when current CEO, Ed Breen spun off the Electrical and Healthcare segments to create three publicly independent companies.
In 1992, Dennis Kozlowski became CEO of Tyco International, and, for the next several years, the company again adopted an aggressive acquisition strategy, eventually acquiring (by some accounts) over 1000 other companies between 1991 and 2001.
Major acquisitions in the 1990s included: Wormald International Limited, Neotecha, Hindle/Winn, Classic Medical, Uni-Patch, Promeon, Preferred Pipe, Kendall International Co., Tectron Tube, Unistrut, Earth Technology Corporation, Professional Medical Products, Inc., Thorn Security, Carlisle, Watts Waterworks Businesses, Sempell, ElectroStar, American Pipe & Tube, Submarine Systems Inc., Keystone, INBRAND, Sherwood Davis & Geck, United States Surgical, Wells Fargo Alarm, AMP, Raychem, Glynwed, Temasa and Central Sprinkler designs.
To reflect Tyco’s global presence following the abundant acquisitions, the company’s name was changed from Tyco Laboratories, Inc. to Tyco International Ltd. in 1993. In addition, Tyco launched The Pipeline, an internal employee newsletter; the title was later changed to Tyco World. Its final issue was published in April-May 2006.
In July 1997, Tyco merged with a wholly-owned subsidiary of a smaller publicly-traded security services company named ADT Limited. Upon consummation of the merger, Tyco International Ltd. of Massachusetts became a wholly-owned subsidiary of ADT Limited, and simultaneously ADT changed its name to Tyco International Ltd., retaining the former Tyco stock symbol, TYC. The merger moved Tyco’s incorporation to Bermuda , headquartered in the colonial capital of Hamilton. A new subsidiary named ADT Security Services was also formed out of the merger.
In the same year, Tyco acquired two S&P 500 companies, the electronics connector manufacturer AMP Inc. and the fuse maker Raychem Corp., in a US$3 billion buyout.
Tyco also closed the year spinning off a deep-sea fiber-optic cable-laying division it had purchased from AT&T as Tyco Submarine Systems in a much anticipated IPO.
Tyco’s aggressive acquisition strategy continued into the early 2000s, with the purchases of General Surgical Innovations, Siemens Electrochemical Components, AFC Cable and Praegitzer. The additions gave Tyco an ending fiscal 2000 year revenue exceeding $28 billion, near $2 billion coming from the sale by a subsidiary of its common shares.
In the fiscal 2001 year, Tyco acquired Mallinckrodt Inc. and Simplex Time Recorder Company which it later merged in January 2002 with Grinnell Fire Protection to form an indirect wholly-owned subsidiary, SimplexGrinnell LP, the world's largest fire protection company. For the year ended September 2001, revenue exceeded $110 billion. However, the company more than doubled its long-term debt, by over $80 billion.
In October 2001, the Engineered Products and Services segment acquired Century Tube Corp, and followed it by buying Water & Power Technologies in November 2001. The following November, the Tyco Electronics segment acquired Transpower Technologies. The next month, the Plastics and Adhesives segment acquired LINQ Industrial Fabrics, Inc.
Later that month, Tyco’s acquisitions continued throughout all of its segments: the Electronics segment acquired Communications Instruments, Inc. The Healthcare segment bought Paragon Trade Brands. The Engineered Products and Services segment acquired Clean Air Systems. And the fire and Security segment of Tyco acquired SBC/Smith Alarm Systems, DSC Group, and Sensormatic Electronics Corp.
For all the acquisitions Tyco made in 2002, the company also incurred extensive losses. During the first quarter of 2002, following the recession of the previous year, the electronics segment recorded a charge of over $2 billion, related to massive overcapacity of fiber-optic cable, which in turn affected the in-process buildout of Tyco's global undersea fiber-optic network, known as Tyco Global Network (TGN). TGN generated a loss for fiscal 2002 of over $3 billion, with a restructuring charge of over one half of $1 billion. Construction of TGN was eventually completed in 2003.
The electronics segment also recorded over $1 billion in restructuring charges in 2002 from inventory write-down and facility closures. In addition, 2002 struck Tyco with two goodwill impairments, the first for over half of $1 billion in the second quarter, due to their fiber-cable overcapacity issue and other corporate problems. The second, costing the electronics segment a quarter of $1 billion related to sales issues in Power Systems, Electrical Contracting Services, and the Printed Circuit Group. To make Tyco’s financial matters worse, the company lost over a quarter of $1 billion in investment during 2002 in FLAG Telecom Holdings Ltd.
In an effort to cut losses, on July 8, 2002, Tyco divested its Tyco Capital business through an initial public offering, with the sale of 100% of the common shares in CIT Group Incorporated. It recorded the CIT divestment as discontinued operations for 2002, for a $6 billion loss, and as an almost $7 billion impairment charge. That month, the Tyco Healthcare segment also divested Surgical Dynamics, Inc.
For the year ended September 2002, Tyco revenue rose to nearly $35 billion. However, it suffered more than a $9 billion loss that year, which included the asset impairment write-down of TGN by over $3 billion, losses of nearly $2 billion for the two restructuring charges, and over $1 billion from the two goodwill impairment charges. In all, the net charges totaled nearly $7 billion of the loss that year. The stock price plummeted.
To add to the financial woes of the company, midway through the fiscal 2002 year, Tyco became embroiled in a massive scandal involving the excesses by its former chairman and CEO, L. Dennis Kozlowski, and his senior management team. Kozlowski resigned and former Tyco CEO John F. Fort became interim CEO until the board of directors completed a search for a permanent replacement. As a consequence, on June 17, 2002, Tyco filed federal suit against Mark H. Swartz, Tyco's former executive vice president and chief corporate counsel, and Frank E. Walsh, a former director
Breen made an immediate impact on Tyco bringing his world-class leadership team which gutted the board of directors and leadership team that worked with Kozlowski. One month after his appointment, Tyco announced the appointment of Jack Krol as lead director of the Board of Directors with the priority of improving Tyco's Corporate Governance.
Breen made additional changes, appointing David FitzPatrick as Executive Vice President and CFO, William Lytton, Executive Vice President and General Counsel, and Eric Pillmore as Senior Vice President of Corporate Governance.
With a new management team in place, Tyco began a two phase internal investigation of former CEO Kozlowski. The investigation led to Tyco filing two federal law suits. On September 12 and December 6, 2002, Tyco filed a federal suit against Kozlowski and an arbitration claim against former CFO and director, Mark H. Swartz. Swartz, however, failed to submit to the American Arbitration Association and Tyco followed with a federal suit against him.
On November 27, 2002, the State of New Jersey took action in the scandal, filing a federal suit against Tyco and former personnel, with charges in part of violating the New Jersey RICO statute, stemming from the Kozlowski scandal. As a result of the scandal, Tyco and some former directors and officers were named as defendants in more than two dozen securities class-action lawsuits. Most of the cases were consolidated and transferred to the United States District Court for the District of New Hampshire and filed by court-appointed lead plaintiffs on January 28, 2003, as the case In Re Tyco International Securities Litigation, citing causes of action under the Securities Act of 1933 and the Securities Exchange Act of 1934. That March 31, Tyco made a motion to dismiss, which was granted in part over a year later, on October 14, 2004.
Removed from the scandal, Tyco made internal moves within the company in 2003 forming its Plastics & Adhesives business segment, a former piece of the Healthcare & Specialty Products segment. Other changes came in Tyco’s corporate governance: Tyco’s board re-elected John Krol as lead director, Tyco reorganized the assignments of the board’s committee, adopted a new board of governance principles and new Delegation of Authority policy which strengthened control over cash disbursements within the company.
The final improvement on corporate governance came in the Guide to Ethical Conduct. The guide was produced to advise employees as to correct procedures and warn of unethical practices and behavior. All Tyco employees are now required to take a brief ethics course and sign an annual ethics statement.
By year end in September 2003, revenue was again up, reaching close to $36 billion and the company returned to profitability, by nearly $1 billion, despite more asset impairments and other charges totaling nearly $2 billion. Over half of $1 billion of the impairments were from a charge in the Fire and Security segment related to ADT Security Services. The other losses came from TGN (under three-quarters of $1 billion). Notably in 2003, the US dollar fell strongly against the euro. The change in foreign exchange rates benefited Tyco, accounting for $1.7 billion of the increase in revenue in 2003.
In the second quarter of 2004, ADT Security sold off Sonitrol.
In all, within its divestiture program, by fiscal year end of 2004, Tyco had divested 21 businesses and liquidated four non-core businesses, primarily within the Fire and Security segment.
In September 2004, Tyco also divested Electrical Contracting Services from the electronics segment, due to a decrease in sales. After September 30, Tyco divested an additional seven non-core businesses, bringing the program aggregate proceeds up to $500 million that year.
By the end of 2004, Tyco employed under 260,000 people, with two-thirds outside the United States. Revenue was up strongly, to over $40 billion for the first time. Once again the strengthening euro against the dollar helped Tyco, accounting primarily for $1.5 billion of the increase in revenue. Various charges, losses, and debt repayment totaled nearly $1 billion in 2004, however profitability tripled that year to almost $3 billion.
Tyco continued its divesture program throughout 2005. The largest divesture coming in the announcement of a definitive agreement to sell its Plastics, Adhesives and Ludlow Coated Products businesses to an affiliate of private investment firm Apollo Management, L.P. Tyco believed the segment no longer within the company’s portfolio.
Tyco was awarded the largest statewide public safety communications project in the United States in 2004 when one of Tyco Electronics’ businesses, M/A-COM signed a contract to maintain New York’s Statewide Wireless Network (SWN). The contract was worth approximately $2 Billion and would last for 20 years. Tyco also acquired two key companies to its Healthcare segment. Vivant Medical Inc. and Floréane Medical Implants.
By the end of the fiscal year 2006, Tyco’s revenue had eclipsed nearly $41 billion. Despite the strong cash flow, growing revenue and decreased debt, Tyco and its Board of Directors approved a plan to separate Tyco into three publicly independent companies. Tyco believed that this would allow for each segment to perform better within its particular market and create more value for its shareholders.
The separation was completed in July 2007, when Tyco separated into three publicly independent companies:
Following the separation, Chairman and CEO, Ed Breen remained at the head of Tyco International, which is now composed of five major business segments: ADT Worldwide, Fire Protection Services, Safety Products, Flow Control and Electrical and Metal Products. The company generated revenue of $76.9 billion in 2007 and employs 918,000 people across all 50 states and in more than 60 countries.
An official "Separation Management Team" was created to deal with all aspects of the separation and to make it as smooth as possible for customers, employees, and shareholders. Bob Scott was announced as its leader. Scott had joined Tyco in 2004.
On June 29, 2007, Tyco completed the share distribution separating the company into three wholly independent, publicly traded companies, each with its own board of directors, CEO, management staff, and financial structure.
The three new companies became:
Edward Breen, CEO of Tyco at the time of the split, announced that he would be staying on as CEO of the newly structured Tyco International, overseeing TFS/TEPS.
Completing the share distribution, on June 29, shareholders received one common share each of the two new companies, Covidien and Tyco Electronics, for every four common shares held of the old Tyco International stock. That July 6, the new Tyco International issued a one-for-four reverse stock split.
During jury deliberations, juror Ruth Jordan, while passing through the courtroom, appeared to make an "okay" sign with her fingers to the defense table. She later denied she had intended that gesture, but the incident received much publicity (including a caricature in the Wall Street Journal), and the juror received threats after her name became public. Judge Michael Obus declared a mistrial on April 2, 2004.
On June 17, 2005, after a retrial, Kozlowski and Swartz were convicted on all but one of the more than 30 counts against them. The verdicts carry potential jail terms of up to 25 years in state prison. Kozlowski himself was sentenced to no less than eight years and four months and no more than 25 years in prison.
|Revenue (in US$B)||$18.8*||$41.0||$39.3||$38.0||$36.8||$35.6||$34.0||$28.9||$22.5||$19.1||$6.6|
Some of the many products made by Tyco include: