Pentair and Tyco plan $4.5 billion merger

Two of the sector's biggest names combine, and investors of both companies applaud the deal.

By Benzinga Mar 28, 2012 5:50PM
By Brett Callwood, Benzinga Staff Writer

Industrial company Pentair (PNR) will combine with the division of Tyco International (TYC) that makes valves and other flow-control instruments.


This all-stock deal brings together two of the industry's biggest names, and was valued at $4.53 billion. The moves comes as Tyco continues to break itself up into independent companies.


Tyco will spin off its flow unit to shareholders, and the business will immediately merge with the operations of Pentair, which is based in Minneapolis, according to Bloomberg. Tyco shareholders will own 52.5% of the combined company, with Pentair investors owning the rest. The new company will keep the Pentair name.


Pentair shares soared after the announcement, closing Wednesday up 15% to $46.32. Tyco investors were also pleased, sending the stock up more than 4% to $55.81.


Tyco announced last year that it is dividing into three companies. This latest flow-control merger will create a new business with $7.7 billion in combined sales. Integrating the companies could create as much as $250 million in annual savings.


"The new Pentair will be well positioned to benefit from the increased demands on energy, water, infrastructure and industrial process resulting from the growing population and wealth of developing economies," Pentair CEO Randall Hogan, who will be in charge of the new company, said in a statement.


The new company will also take on roughly $275 million of Tyco Flow debt. Pentair closed Wednesday at $40.26, and this transaction values TYC at $4.9 billion, including that debt and $94 million of minority interest.


On Wednesday, Morgan Stanley estimated that Pentair could achieve earnings of $5 a share by 2015, taking into account expected operating synergies of $200 million and the tax benefits of incorporating in Switzerland.


The merger will reinforce the view that Tyco management is focused on maximizing shareholder value after its spinoffs, which is a key positive, Morgan Stanley analysts wrote in a report. But the analysts added that they saw little in the announcement to force the stock higher fundamentally.


More From Benzinga:
9Comments
Mar 28, 2012 6:33PM
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@thomasames, you're such an @$$. What an idiot. This is a profit-maximizing idea for two successful business to join together to make even more money. 

Why would you even compare this new deal to a monopoly. I repeat. Idiot. 
Mar 28, 2012 8:02PM
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This merger will definitely be a success, it seems!!
Mar 29, 2012 12:25PM
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Looks like things are looking up for Tyco International!
Mar 29, 2012 11:21AM
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When I first heard about the company Tyco, I thought it had something to do with RC cars. What a disappointment.
Mar 29, 2012 11:19AM
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Finally! Haven't had a major merger in a while. I like TYC
Mar 29, 2012 11:19AM
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This merger is simply business, as noted by Morgan Stanley the announcement should do little to boost share value.  Anyone remember Compaq and Hewlett-Packard?
Mar 29, 2012 11:18AM
Mar 28, 2012 6:31PM
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Haha, coming new world order? Have you been under a rock? 
It's here we've lived in it our whole lives, unless your over 50... 
then I don't care about you opinion anyway.  

Anyway, should we have a huge number of companies trying to control the flow?
Or just one mega valve company?
Mar 28, 2012 6:21PM
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Why the hell would Pentair merge with Tyco? This is just another sign of the coming New World Order. There should be more blocks put up to prevent companies from merging so often and frequently. 

In order for a capitalistic society to be maintained, we need to avoid having the massive monopolies of the past as was evidenced by Rockefeller and Carnegie. 

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