Tyco International Ltd. (TYC) recently completed the divestment of its European Waterworks business. The business was sold to Triton, a private equity firm, for about $245 million, as per the agreement entered in late July 2010.
 
The $350 million annual revenue generating European Waterworks business engages in design, manufacture and supply of tools for commercial and residential customers. The product brand includes Erhard, Belgicast, Bayard and Atplas. The business operates through 13 work locations and has employee strength of about 1,500.  
 
Through this divestment, the company intends to intensify its focus on its existing portfolio, certain water infrastructure projects and regions.
 
Tyco fills a wide range of the diversified needs of 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.
 
We are bullish on the company’s fortunes based on the relative stability of global security and fire markets, high and predictable cash generation, limited balance sheet risk, and easy cost-out opportunities. There is a potential catalyst in the company’s solid balance sheet and healthy liquidity position. The company’s positive and high quality operating performance is commendable despite accelerating weakness in global non-residential construction and project-related end markets.
 
The company’s business strategy includes acquiring companies and making investments that complement its existing businesses. These acquisitions and investments could be unsuccessful or consume significant resources, which would adversely affect its operating results.
 
The company continues to be subject to a number of lawsuits stemming from the actions of its prior senior management. Adverse outcomes of these matters could impact its financial condition, results of operations or cash flows. Material adverse legal judgments, fines, penalties or settlements could adversely affect its financial health and prevent it from fulfilling obligations under its outstanding indebtedness.
 
Based in Pembroke, Bermuda, Tyco International Ltd. operates in 60 countries and manufactures security products and services, fire protection and detection products and services, valves and controls, and other industrial products. Major competitors of Tyco are General Electric Co. (GE), Honeywell International Inc. (HON) and United Technologies Corp. (UTX).
 
We currently maintain our Neutral rating for the long term on Tyco International Ltd., with a Zacks #3 Rank (short-term Hold recommendation) over the next one-to-three months.
 
GENL ELECTRIC (GE): Free Stock Analysis Report
 
HONEYWELL INTL (HON): Free Stock Analysis Report
 
TYCO INTL LTD (TYC): Free Stock Analysis Report
 
UTD TECHS CORP (UTX): Free Stock Analysis Report
 
Zacks Investment Research