Tyco International Ltd. (TYC) has entered into an agreement to acquire 75% equity stake in KEF Holdings Ltd., a privately-held company based in the United Arab Emirates. The acquisition is valued at $300 million in cash.
Currently, 55% of KEF business is held by Kottikollon and remaining 45% by Dubai International Capital (DIC). As per the deal, Kottikollon will retain 25% stake in KEF following the closure of the transaction while DIC will sell its entire share in KEF. The acquisition is subjected to regulatory approvals and is expected to be completed in early summer.
The addition of KEF Holdings, a well-built valve manufacturer and a leading global supplier of steel castings to the oil and gas, chemical, mining and power industries, enhances Tyco’s expertise and offering in core security, fire and flow control. The company’s presence in the Middle East region will be extended and customer service enhanced by leveraging the strengths and expertise of the KEF team in the field of design, manufacture and service.
The customers of KEF will receive an increased level of customized choice and service. KEF has 900 employees and is expected to generate revenue of about $140 million in calendar year 2011.
Tyco fills an incredibly wide range of needs for businesses and governments, educational and medical institutions, and commercial industries ranging from food to automobiles. It also boasts of leading brand names for products and services under Flow Control, Fire Protection Services, Safety Products and Electrical & Metal Products. The company continues to invest in its businesses to strengthen its long-term competitive capabilities of both products and services.
However, the ADT business may experience higher rates of customer attrition, which would reduce future revenues and the estimated useful lives of assets related to security monitoring customers, thus increasing depreciation and amortization expense. Major competitors of Tyco are General Electric Co. (GE), Honeywell International Inc. (HON) and United Technologies Corp. (UTX).
Tyco International Ltd. emerged from the July 1997 acquisition of Tyco International Ltd., a Massachusetts corporation, by ADT Limited, a public company organized under the laws of Bermuda, when ADT Limited changed its name to Tyco International Ltd. On June 29, 2007, Tyco International Ltd. completed the spin-offs of Covidien and Tyco Electronics, formerly its Healthcare and Electronics businesses, respectively, into separate, publicly traded companies in the form of distribution to Tyco shareholders. Effective March 17, 2009, the company discontinued its existence as a Bermuda corporation, but remains a Swiss-domiciled entity.
We currently maintain our Neutral rating on Tyco International Ltd. for the long term, with a Zacks #2 Rank (short-term Buy recommendation) over the next one-to-three months.
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