Tyco International to merge flow control business with Pentair

By Lisa Kerner

Charlotte, N.C., March 28 - Pentair, Inc. and Tyco International Ltd. executives announced a definitive agreement to combine Tyco's flow control business with Pentair in a tax-free, all-stock merger.

The merger values Tyco Flow at about $4.9 billion including about $275 million of assumed Tyco Flow net debt and $94 million of assumed minority interest.

The transaction is structured as a stock-for-stock exchange using a reverse Morris trust in which Tyco will complete the spinoff of Tyco Flow to Tyco shareholders. That will be immediately followed by the merger of Pentair into a subsidiary of Tyco Flow.

Tyco shareholders will own 52.5% of the combined company, and Pentair shareholders will own 47.5%.

One benefit of the reverse Morris trust transaction is that it allows for the tax-free distribution of Tyco Flow equity under U.S. and Swiss laws.

The newly combined company will bring together complementary leaders in water and fluid solutions, valves and controls, and equipment protection products to create a merged company named Pentair with estimated pro forma 2012 revenues of $7.7 billion.

Current Pentair chairman and chief executive officer Randall J. Hogan will lead the combined company, which will be domiciled in Switzerland and have its headquarters in Minneapolis.

The transaction has been unanimously approved by the boards of both companies.

Hogan said discussions to acquire Tyco's flow business began in January. Tyco announced plans to spin off the business in September 2011.

Tyco said it expects to complete the spinoff and combination with Pentair in September.

Pentair chief financial officer John Stauch said $1.3 billion of combined EBITDA is expected in 2013, which will allow the new company to invest in high-growth verticals and return cash to shareholders.

Tyco is a Princeton, N.J.-based provider of electronic security products and services, fire protection and detection products and flow control.

Tyco Flow manufactures flow control products for the energy markets, general process industries, mining and water markets.

Pentair is a Minneapolis-based maker of products used in the movement, treatment, storage and consumption of water.

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