Tyco Cancels Company Breakup

Tyco had hoped that the four new companies would be considered worth more separately than they were together, but buyers were not forthcoming.

Now the company has decided this plan was a mistake. Tyco wants to sell the financial services unit, CIT, as initially planned. However, the company says it will lay off more than 7,000 workers to reduce costs and predicts much lower profits this year. Following this announcement, Tyco's stock tumbled to its lowest level in four years, losing 65% of its value in this year alone. As it then became apparent that private buyers were not interested in paying the US$6.5 billion asking price for CIT, Tyco's shares fell another 4%, reducing the company's value by nearly $20 billion in just a few days. Investors appear to have become increasingly skeptical about the company's accounting practices, particularly after the collapse of the energy giant, Enron.

Tyco's health-care unit includes U.S. Surgical (sutures and laparoscopes), ValleyLab (surgery systems), Mallinckrodt (diagnostic imaging products), and Kendall Healthcare (syringes and needles). In 2001, these produced revenues of $US7.1 billion.




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